Today’s Key Market Drivers – 17th August 2017
The US Dollar dipped again on Wednesday after the latest minutes from the US Fed committee showed inflation remains a genuine concern for the Fed and they are unlikely to raise the official cash rate again until inflation shows some traction in the economy. 2% or better is the inflation target the US Fed wants to see however US inflation has been below this level for over 5 years. Recently traders had priced in a 50% chance the US Fed would raise the official cash rate again in December however it now appears with more committee members growing cautious about their inflation expectations the likelihood of a rate increase is falling and so is the US Dollar. Donald Trump didn’t help the US Dollar’s cause when it was announced the Trump administration was disbanding the US Manufacturing Council and Strategic Policy Forum. In another sign, the US Dollar is falling out of favour with investors as the yield on the US 10 Year Treasury (bond) has fallen to 2.23%. More demand for US Government debt will drive up the yield and also helps support the US Dollar’s value. A falling yield generally sees a falling dollar and that is what is happening.
The Aussie and Kiwi Dollars benefited from the weaker greenback, stronger commodity prices and a generally positive risk on market mood Wednesday. Keep in mind that low-interest rates are the reason why global stock indexes are at all time highs. Where else are you going to put your money when you get such poor annual returns from leaving your money in the bank. Stocks have been the chosen one for many since 2010 and unless the US Fed and other Central Banks such as the ECB and BOE continue or start to raise rates it is unlikely swags of money will leave the stock market and return to bank coffers.
The Pound initially rallied after better than expected monthly jobs and weekly earnings numbers were released. The rally was short lived however with traders still questioning the UK’s ability to navigate Brexit without seeing inflation and growth stall.
Looking ahead to today the July Australian Unemployment Rate will be released with July traditionally being a positive month for jobs growth. The market expects around 20,000 jobs to have been created last month with the 3 year average for July being closer to 35,000. This is one data number traders like to trade so if the Unemployment Rate is out of line with economists expectations the AUD could move half a cent or more. UK Retail Sales, Euro Zone CPI for July and the monthly ECB Minutes will be released in the European trading session. US Industrial Production is scheduled for the US trading session.
About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts, and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular key-note speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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