Today’s Key Market Drivers: 1st October 2018

“The Canadian economy is on the move.”

Please keep in mind today is a public holiday in Queensland and the offices of LTG GoldRock are closed today.

The Canadian Dollar gapped up strongly this morning in what I believe is a sign of things to come. Friday saw the latest GDP figures for Canada beat market estimates coming in at 2.4% vs the 2.2% expected and with more key data to come today and later this week I think the Looney is set for a move higher over the medium term. The Bank of Canada has already moved the official cash rate higher this year and with the recent stronger than expected economic data numbers I think the market will begin to price in another rate hike from the BOC before the end of this year. The Canadian Dollar will also benefit from any weakness in the US Dollar and it’s my view all the good fundamental news is baked into the Greenback and from a technical standpoint it’s setting up on some currency crosses for a pullback. Tonight at 11.30pm AEST will see the release of Canadian Manufacturing numbers and if recent data is anything to go by the current gap on the USD v CAD may struggle to close early this week and the Looney may continue its upward move.

The AUD v USD is going to get busy tomorrow when the RBA releases its October statement. There won’t be a change to the official cash rate which will stay at 1.5% but I do think the RBA is soon going to talk up the possibility of wages growth and that would send the Aussie Dollar higher in the short to medium term. Long term there is the potential for the AUD v USD to be in the 0.60’s in 2019 with the US and Australian interest rate differential widening but you cannot simply fall in love with a direction and not take advantage of medium-term moves back higher when they occur. I am expecting a more hawkish upbeat statement from the RBA Tuesday and if I am right a move higher on the AUD would result.

The Euro continued to struggle on Friday under the weight of the Italian Budget concerns. Markets are concerned the Italian Budget is not in line with the goals of the European Union and only puts Italy further and further in debt. Italian debt to GDP is 131.8% a rise of 30% in the past 10 years. US debt v GDP is 105.2% and Australia’s debt to GDP is 41.9% up from 11.7% in 2008. Australia seems well placed when you compare Japanese debt to GDP which is currently running at 253%. The major difference is much of Japan’s debt is to itself unlike Australia and other nations where the debt is owed all over the world. To use an analogy Japan owes money to its mum and dad. Australia and other nations owe money to the bank. Nobody cares Japan owes money to itself but the market cares when a country such as Italy owes money all around the world to creditors.

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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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