Today’s Key Market Drivers: 1st November 2018

“The US economy 10 years on from the GFC is going gangbusters.”

A private unemployment report suggests the US economy added another 227,000 jobs in the month of October and this helped spur on the buyers of the US Dollar and US stock indexes who had already been given a strong lead from Asian and European trading sessions. Tokyo closed up 2.16% and European markets rallied strongly across the board up over 1.5% with France being the stand out performer up 2.31%. Ordinarily, we would see the Yen weaken with such a strong risk-on sentiment, however, the Yen gained after the Bank of Japan reminded traders that it is going to continue to keep the official interest rate at -0.10% and pump trillions of Yen into the economy. There was a disconnect with how the Yen traded on Wednesday to how it would normally trade when stock markets rally so strongly. The Yen is a safe haven currency and 95% of the time or better when we see global stock indexes up 1% or more the Yen weakens. That was not the case on Wednesday and even the USD v JPY was sharply lower. Broadly speaking we can usually pinpoint why the market moves the way it does but occasionally it does something that is tough to explain.

The latest Canadian GDP data showed the economy in Canada continued to expand with 3rd quarter GDP beating market estimates at 2.5% annualised. Although the GDP number was slightly better than the market expected it was not good enough to give traders a reason to buy the Caddie over the US Dollar on Wednesday.

Euro Zone inflation data met economists estimates, however, German Retail Sales had a big miss coming in at -2.6% far below the +1% economists expected. The Euro once again struggled to find any buyers and continues to provide traders with no reason to get excited about a potential bottom in the currency with very average economic data recently. The EUR v USD is flirting with its 2018 low and I suspect a move back below 1.1300 is imminent. The Pound was an early gainer in the European trading session but lost steam once the US trading session opened and the US 10 Year Treasury Yield began to move higher in lockstep with the US Dollar. We’ve just closed off another month with no positive news about a Brexit deal being done which continues to weigh heavily on the Pound.

The Aussie Dollar has struggled in the past 24 hours with Wednesday’s Inflation data failing to beat market estimates and a weaker than expected China Manufacturing number. A rise in the US 10 Year Yield and better than expected US economic data hasn’t helped either, pushing up demand for the greenback. Today sees Aussie Trade Balance number set for release at 11.30am and if out of line with expectation can move the local currency up to half a cent.

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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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