Today’s Key Market Drivers: 20th September 2018

“UK Inflation data beats market estimates when released Wednesday.”

The British Pound got a boost on Wednesday following better than expected inflation data. The market was expecting inflation to be at 2.2% annually but the number was actually 2.4% and gives the Bank of England every confidence the UK economy is on solid ground and they can move towards another interest rate hike in the coming 6 months. The gains on the Pound were erased through the US trading session after a report was released saying Theresa May had rejected an offer surrounding an Irish border issue that is part of Brexit negotiations. As expected the Bank of Japan kept its official interest rate unchanged Wednesday and thus the Yen was barely moved on the news. The Yen has been generally weakening in recent days as the safe haven currencies are out of favour and the “risk on” sentiment on stocks and emerging markets currencies remains the flavour of the week. Even with Trump’s new trade tariffs against China and their retaliation, the market appears to be unfazed.

The US Fed is going to raise the official cash rate next week but what traders really want to hear is what pace the US Fed will continue to raise rates into the future. I am betting they will announce that they will slow the pace at which they have been raising rates and they will also need to address the China trade tariffs and tell the market they could negatively impact US growth and thus they will use a wait and see approach. As I mentioned earlier this week I think the likelihood is there is going to be a lid on the US Dollar for a while and any USD gain leading into the Fed statement next week could be erased very quickly.

The latest 2nd quarter GDP figures for New Zealand were released at 8.45am AEST this morning with the economy growing by 1% for the quarter and 2.8% annualised. The Kiwi Dollar has initially surged higher on the news as traders will now price in the likelihood the RBNZ may change its mind and bring forward future rate hikes from 2020 to 2019.

Today sees the release of the official deposit rate for Switzerland which isn’t likely to impact currency markets. UK Retail sales may give the Pound a little boost but won’t be much. What is shaping up as a potential market mover for the Pound and Euro is the press conference post a meeting between the heads of state of the European Union. I am looking for them to say a deal with the UK on trade is moving toward a positive conclusion. The balance of the week has very little high impacting news that will grab the market’s attention so my thoughts are traders are now going to sit on their hands and wait for the US Fed’s statement next week. That may see some back and forth price movement and no doubt will suck a few traders in and out of positions. Look after your risk management and remain consistent with your approach to how you look to enter and exit trades.

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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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