Today’s Key Market Drivers: 21st October 2019

Pound survives major slip after UK parliament rejects another proposal.

It appears the British Pound has survived what could have been a major slip lower after the House of Commons rejected Boris Johnson and the European Union’s latest Brexit proposal. The GBP v USD opened slightly to the downside from Friday’s close but nothing like what many analysts were expecting.

This crazy Brexit situation in my view will likely lead to another extension request, which although the EU is sick and tired of dealing with will likely agree too simply because if the UK crashes out of the EU without a deal it will be disastrous not only for the UK but also the EU and will have a knock-on effect through global financial markets.

One thing is for sure, the Pound will continue to remain extremely volatile and I urge you to look after your risk management and don’t get sucked into the market just because it did not gap substantially up or down today. I cannot see how the Pound makes a new high on Monday under the current background of political and economic instability. However, given how fluid the news is and how close we are to October 31 nothing would surprise me.

US markets provide a weak lead for traders this week.

81% of the companies in the S&P 500 that have reported 3rd quarter revenues have topped analysts’ estimates but that didn’t stop the Dow Jones and S&P 500 from slipping off its highs on Friday thanks to Boeing falling sharply after more damaging news about its grounded 737 Max aircraft. The safe-haven currencies gained and the market closed the week in a risk-off mode which is where I expect markets to open today.

One analyst said over the weekend that if company earnings continue to show similar results this week, he would expect US stock indexes to post new all-time record highs in the days ahead. Only 14% of the stocks in the S&P 500 have reported 3rd quarter earnings so far.

I personally don’t agree and think markets will finish the week lower.

No high impacting news until Thursday.

With no high impacting economic data until Thursday traders will be fixated on Brexit developments, US company earnings and any news surrounding Phase 1 of a US / China trade deal. Donald Trump gave the AUD and NZD a boost late last week when he indicated he was keen to sign a deal with China and if the details of Phase 1 can be agreed too and signed off on before Xmas the local currency should continue its recent uptrend against the greenback.

That is assuming the UK does not crash out of the EU on October 31 and stocks don’t pull back sharply. If markets turn bearish the AUD and NZD are headed back lower.

Canadians go to the polls today.

We should expect to see some volatility on the Canadian Dollar as their national election takes place today. Unless the result is a surprise or whoever wins has policies that will greatly impact the Canadian economy, I doubt the currency will see substantial volatility.

Currencies don’t move in trends for long based on elections, certainly the price can jump around in a 24-hour period but currencies move long term on what Central Bank monetary policy is doing and how the overall economy is performing.

My guess is the incumbent Prime Minister Justin Trudeau wins.

In other news.

If you missed Friday’s Facts, Truths and Tricks Episode of Money Exchange then here is a link to watch it now.

I spoke about the importance of knowing the industry you are investing in and who the sharks are and what you should know that brokers don’t like to discuss.

Permanent results only come from permanent changes.


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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