Today’s Key Market Drivers: 20th May 2019
Aussie Dollar gaps up on a Morrison win.
It is clear to see by the gap up on the Aussie Dollar and share market what the investment banks and hedge funds thought about the surprise Morrison win. The incumbent government was cheered as the better money manager with a sizeable gap up on the Aussie against all its major rivals.
I do expect the gap on the Aussie Dollar to close at some point and just because the Coalition government was returned does not mean the RBA won’t drop rates next month nor does it mean the Australian economy is about the strengthen. The gap this morning is simply a short-term market reaction and there is no doubt in my mind the gaps created will be filled in future trading sessions.
Tomorrow will see the release of the latest monthly minutes from the RBA which should give us an indication as to why they held back from dropping rates in May and if June is a high probability of a rate cut.
Governor Lowe is speaking in Brisbane on Tuesday less than an hour after the minutes are released and no doubt the market will be keen to hear what the Central Bank boss has to say.
Stock markets in Asia open higher on Monday even after a weak lead from Wall Street on Friday.
The ongoing trade dispute between the US and China continues with news wires on Friday and the weekend running stories that the negotiations have broken down and it is unlikely any deal will be done before the G20 Summit in Japan at the end of June with President Trump and Xi will meet.
The S&P 500 closed down half a percent on Friday but it appears Asian markets have ignored the weak leads and as I write are higher at the open. The Asian trading session should not be used as a solid guide to what may occur throughout the rest of Monday and currency traders inside investment banks and hedge funds know the real volumes won’t arrive until after 8am London time when European markets get cracking for the week.
The Yen has weakened at the opening of platforms this morning after rallying for the past week on trade and global growth fears. It is my view the recent sell-off may be about to reverse and whilst I don’t discount the fact, we could go lower fundamentally we are looking good for a bounce and technically we are also.
A week of Central Bank minutes but no monetary policy statements.
For the second week in a row, we don’t have any of the major Central Banks releasing monthly monetary policy statements but we will see the release of the May minutes from the RBA, ECB and US Fed with the US Central Banks minutes likely watched more closely than any of the others. Currently, the US economy is doing sufficiently well enough to withstand a rate hike towards the end of the year but the question remains how the growing trade dispute with China will impact consumer and business spending. If the US economy begins to weaken the US Dollar is going to fall but I don’t expect that to happen until later in the year if at all.
I am heading to the USA for 6 weeks following this weekend’s Boot Camp in Melbourne and will be spending time in Florida, New York and California and will be able to get a real feel for how the economy is doing rather than just read about it. The USA is the most resilient economy in the world and every year I spend time there it just reminds me why it’s the most powerful economy in the world, by a mile!
What else is happening this week that could get some attention?
Apart from the monthly minutes, the following data has the potential to move the related base currencies. UK CPI (Inflation) is released on Wednesday and if out of line with market expectations will move the Pound. The ECB President is speaking in Frankfurt Wednesday but the big market mover this week for the Euro is how the big money will play the outcome of European Parliamentary elections that are scheduled for the middle of the week. Trade Balance numbers for New Zealand are due on Friday along with Japanese CPI which is never a market mover and also US Durable Goods. Durable Goods is really just a big-ticket retail sales number which is made up of purchases of goods that are supposed to last more than 3 years. Such as washers, dryers, furniture, TV’s etc. Bigger ticket items generally last longer and if US consumers are still lapping up these more expensive purchases its good news for the economy as it may help boost inflation down the track.
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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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