Today’s Key Market Drivers: 18th February 2019

US Dollar weakened on Friday following San Fran Fed President remarks.

The US Dollar fell on Friday following remarks from San Francisco Federal Reserve President Mary Daly who said. “If the economy evolves as I just said I expect it to – 2 percent growth, 1.9 percent inflation, no sense that (price pressures are) going up, no sense that we have any acceleration – then I think the case for a rate increase isn’t there this year.

What the market didn’t take into account on Friday, I think, is the fact that the Fed cannot allow the stock market to continue to rise in 2019 and break new highs without raising rates. People would continue to leverage themselves into stocks creating a huge bubble that will inevitably burst. I believe if stocks continue to rise the Fed will need to step in and raise rates and thus keeping a lid on things.

Any pullback on the US Dollar in my view will be seen as a buying opportunity as virtually every other major Central Bank is highly likely going to keep rates on hold in 2019. The US Fed and Bank of Canada are the only two Central Banks in my view with any chance of raising rates.

Could the ECB be about to print money again?

Just when the market thought the ECB was done with its magic money printing program a member of the ECB Executive Board said on Friday a new set of fresh loans to European Banks was possible. The comments failed to send the Euro lower mostly due to the fact the US Dollar was being sold following the comments from the San Fran Fed President about US interest rates.

If the ECB was to fire up the printing presses again and print money and hand it out to banks and nations throughout Europe that are cash strapped the Euro would highly likely decline sharply in value.

No “new” news surrounding China / US trade talks.

US and China trade officials continued their discussions over the weekend and it appears there is nothing “new” to report to the market about a trade deal that will simmer tensions between the two superpowers. Additional trade tariffs on China imports into the USA will automatically kick in on March 1st which is the agreed expiry date to the current trade tariff truce that was agreed by both parties back in early December.

The market was hopeful late last week negotiations were progressing well but nothing appears to have been announced over the weekend. The US Dollar will likely fall if a positive trade deal is done as this would be seen as good news for China and emerging market currencies throughout Asia. The opposite is true if a positive trade deal can’t be done as the US Dollar would likely rise along with heightened market concerns about an escalating trade war.

The week ahead.

There is no high impacting news until Tuesday when we will see economic sentiment surveys for Germany and the Euro Area. The market this week will digest monthly Central Bank minutes from the RBA, US Fed and ECB along with speeches given by BOC Governor Poloz, RBA Governor Lowe and ECB President Draghi. Weave into this week official unemployment data for Australia, Inflation data for Japan and US Durable Goods and there is plenty of economic data and commentary to come.

So, what’s your plan this week? Are you going to shoot from the hip and trade for the sake of trading? Are you going to press the button just because the market is moving and you have a platform so you must trade? Or are you going to be diligent and wait for your specific trading strategy to present and only pull the trigger when it does? I would like to think the answer is you will be extremely patient and extremely disciplined with your risk and reward and you only execute trades that meet your trading plan.

Believe in yourself, every day! AB

 

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 keynote 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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