Today’s Key Market Drivers: 19th June 2019
A Trump Tweet and Super Mario comment sets markets moving.
Tuesday’s US trading session was dominated by a Tweet from Donald Trump that said. “Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting.” The Aussie Dollar rallied strongly post the statement gaining close to half a cent as any good news for China regarding a trade deal with the USA is initially seen as good news for emerging markets and closely aligned trading partners with China, which Australia is.
US stock indexes were also sharply higher and the safe haven currencies lower post Trump’s tweet. The S&P 500 gained 1% and the Yen fell against all the major base currencies except the Euro as traders continued to support US stock indexes under the backdrop of a potential US / China trade deal and lower interest rates at the Federal Reserve.
Donald Trump has been openly criticising the US Federal Reserve Chairman arguing the Fed should not have raised rates as far as they did and the economy now needs rate cuts. Bloomberg and financial news networks are reporting this morning that when the President was asked if he still wants to demote Federal Reserve Chairman Jerome Powell, told reporters Tuesday. “Let’s see what he does.”
Donald Trump threatens the independence of the US Central Bank by attempting to meddle in its affairs. He also openly criticised the European Central Bank on Tuesday Tweeting “Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.” Moments later he tweeted. “European Markets rose on comments (unfair to U.S.) made today by Mario D!”
Draghi comments in Portugal sends the Euro to new lows.
After refraining in the latest ECB monthly statement from suggesting the Euro Area needed additional stimulus Mario Draghi didn’t hold back when speaking in Portugal on Tuesday saying the ECB would provide more stimulus measuring if inflation does not pick up. Draghi said the ECB could still cut interest rates further into the negative, adjust its monetary policy guidance and offer mitigating measures to counter the unwanted side effects of negative rates.
What frustrates the heck out of me and one of the reasons why I have said many times Mario Draghi needs to be sacked is that if this is the ECB’s view this week then that would have been its view when its latest policy statement was released. Why didn’t Draghi put in his May statement what he said in Portugal on Tuesday? A Central Banks job is not to create volatility in financial markets by being consistently unpredictable and frankly, Mario Draghi has got a horrible record when it comes to getting the Euro Area economy back on track since the GFC.
Traders are pricing in a rate cut even before the statement.
Yesterday I said traders would likely price in a rate cut at the Fed in the lead up to Wednesday’s official statement and press conference and that’s what’s continued Tuesday. You can expect to see a sizeable move on the US Dollar in the back half of the week with most traders holding off until the Fed statement before taking any additional risk on the Greenback. The Fed started its two-day meeting today (Tuesday) and will deliver its much-anticipated forward guidance on interest rates at 4.00am AEST on Thursday morning.
Traders are expecting stocks to continue to rally to new highs and if the Fed surprises the market and cuts the official cash rate this week then the impulsive move higher will only likely be stronger on stocks and weaken the US Dollar.
Keeping my s..it together when I am in a trading slump.
Please take a moment to watch this short video where I explain how I keep my sanity when the market turns against me and why I need to adjust lower my risk on each trade.
UK and Canadian Inflation data unlikely to overshadow a Fed statement.
Wednesday will see monthly inflation data for the UK and Canada released but neither economic data number is likely to overshadow the Fed’s statement that will come some hours after both sets of inflation data are released.
The UK is yet to announced who will be the next PM and the Pound whilst off its lows in the last trading session still remains under pressure due to the political uncertainty surrounding who will be PM and how and when the UK will finally negotiate its way out of the European Union before the October deadline.
Opportunities are all around you but you’ll usually only notice them when you are ready.
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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