Today’s Key Market Drivers: 18th October 2019

UK and EU agree on a Brexit deal. But…

The European Union leader and UK Prime Minister have announced they have a draft Brexit deal both sides have agreed too. So why is the Pound lower? The answer is simple, Boris Johnson must now take the draft Brexit deal back to the UK where the British parliament will sit over the weekend, consider, debate and Johnson will no doubt do his best to convince the House of Commons to support the deal.

The opposition party has already said it will vote against the deal and as I watched lawmakers interviewed on television post the draft deal announcement it only increased my expectation an extension request is likely. Northern Ireland leaders said they still had issues with the draft deal saying, “these proposals are not, in our view, beneficial to the economic well-being of Northern Ireland and they undermine the integrity of the union.

So, what’s the Pound going to do? The reality is nobody knows and I will continue to warn you that if you attempt to hold a position or trade a position over the coming days you are at risk of substantial loss. Trading is about staying in the game, eliminating the risk where you can and making logical trading decisions that offer solid risk to reward.

I have been consistent in my message all week. I said the EU and UK would come to a deal and then the UK parliament will vote it down forcing Johnson to likely ask for an extension beyond October 30. He may be fortunate enough to have some time up his sleeve between now and October 30 to make some adjustments to the draft deal but many UK parliamentary members are hell-bent on seeing any proposal he brings to the table fail.

US Dollar falls again.

Traders again abandoned the US Dollar on Thursday in favour of the Euro and emerging market currencies including the Aussie and Kiwi. The rally on the Euro was a double whammy driver by positive Brexit sentiment and weaker than expected US economic data that gave traders more reason to believe the economy is slowing and the Fed will drop rates again later this month.

US Housing Starts were down -9.4%, a business outlook survey showed business owners are turning more pessimistic and Industrial Production numbers fell again and missed estimates by some margin. It does now appear the US economy is officially weakening and the company earnings season that is showing better than expected revenue result won’t sway traders to buy US Dollar this week.

Today on Money Exchange.

Join me at 2.00pm AEDT (Sydney summer time) live on the Train With Andrew YouTube channel for Episode #10 of Money Exchange. Today on the show I will be talking about…

  • Trading facts and truths nobody wants to talk about.
  • Why I want to see you diversify your trading skills.
  • Tricks money managers and brokers use to make money at your expense.

Don’t miss today’s Money Exchange because I am going to talk about topics and issues that might make some brokers, traders and money managers squirm but I don’t care, you need to know this stuff if you are any hope of making meaningful money long term and getting the best deal.

Aussie Dollar gets a boost as the jobless rate declines.

The probability the RBA drops the official cash rate in Australia on Melbourne Cup day fell on Thursday as the official unemployment rate fell to 5.2% from 5.3%. The Reserve Bank of Australia recently said the unemployment rate was their current barometer to whether or not they would drop the cash rate again before Xmas.

Wages growth is closely aligned to the jobs market and until jobs and wages improve the RBA will be under pressure to lower rates further. This has been dragging on the Aussie Dollar recently however the drop in the unemployment rate on Thursday coupled with general selling of the US Dollar is the reason why the AUD v USD is sharply higher this morning.

Think about this for a minute.

There is no other news in the financial markets right now bigger than Brexit. This is genuinely a big deal for the European economy which is the biggest economy in the world and the UK is the 6th largest single economy. Your probability of making meaningful returns over time doesn’t come from trying to punt this news event or have trades exposed to the Pound over the coming days.

I liken the price swings we will see in the financial markets to a fight between an up and coming amateur and an experienced boxer. The up and comer is throwing punches left and right, swinging like crazy, tiring himself out trying to knock the other boxers head off. That’s the novice trader. The more experienced veteran just bides his time and swings when the novice least expects it and knocks him out.

If that analogy isn’t making sense then perhaps you’ve heard the story about the young bull and old bull standing on the hill overlooking a field of cows.

If you haven’t heard the “young bull, old bull story” then I’m sorry I can’t tell that one here but if you have heard it, I know you are smiling 🙂

The moral of the story is, don’t be a fool over the coming few days! There is plenty of money to be made being patient.

In other news.

Goldman Sachs is predicting the UK will get a Brexit deal done saying the Pound could rally as high as 1.30 after the deal is announced. Goldman Sachs is one of the worlds largest liquidity providers to the FX market and will highly likely make money whether there is a deal or not. Goldman Sachs has a massive self-interest in seeing liquidity stay high through an event like this and in my opinion, would love to see as many traders as possible attempt to punt the Brexit news. This is the sort of content I am going to be talking about on Money Exchange today.

The sky is not the limit, you are.


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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