Today’s Key Market Drivers: 19th December 2018

“Trump is desperate for the Fed to stop raising rates.”

As we often see when markets make new yearly lows there are always a few bargain hunters around and whilst I don’t believe the lows created on Monday are as low as we will go, US stock markets did attempt a rebound on Tuesday. The Dow Jones was up over 300 points mid-morning but the buyers faded quickly in the afternoon forcing the DJ to close up just 89 points when the bell was rung on Wall Street. Yes, they still actually ring a bell.

The Aussie and Kiwi Dollars both erased strong gains that were made in the Asian and European sessions following comments from China’s President Xi Jinping that were seen as supportive for the local economy. The AUD v USD and NZD v USD rallied earlier in the day as traders sold down long US Dollar positions ahead of the Fed statement. Any perceived good news for China is always going to have a positive impact on emerging market currencies throughout Asia. The point I want to make this morning is that an overwhelming number of news stories are beginning to surface about the potential for a weaker US Dollar post the Fed statement. This will mean many novice traders will be getting short on the US Dollar expecting the US Fed to announce that it will go slow with rate increases in 2019. Experience tells me that those traders will likely have their pants pulled down at 6.00am AEDT tomorrow. The market is already expecting the Fed to raise rates this week and announce they will slow the pace next year, so for the US Dollar to fall sharply the Fed will have to say something that it has not already mentioned previously and I don’t think this is going to happen. The market is pricing in a 70% chance the Fed pulls the trigger on rates in December which is down from 78% a week ago. Trump is desperate for the Fed to stop increasing rates and had another crack at the Fed committee with a Tweet on Tuesday. I think the US Fed will remain upbeat about the US economy and stick to its previous script of continuing to raise rates into 2019 but at a slower pace and this will likely put upward pressure on the US Dollar post the statement.

The market is going to heat up for the balance of the week with a truckload of high impacting economic data. The US Fed, Bank of Japan and Bank of England all announce their December policy statements within 24 hours of one another. The US Fed is first out of the blocks at 6.00am AEDT Thursday morning followed by the BOJ and the BOE at 11.00pm AEDT. In between all of those Central Bank reports we will get UK and Canadian Inflation, New Zealand GDP and Australian unemployment data. Get your game face on, these are the weeks you can learn so much about financial markets.

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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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