Today’s Key Market Drivers: 22nd August 2019
US Fed minutes point to no further rate cuts in September.
As I expected, the US Federal Reserve Minutes gave zero indication that more rates cuts are imminent and they simply reminded the market of what Jerome Powell said at his last press conference. The adjustment lower on the 31st July was a mid-cycle adjustment and does not automatically mean financial markets are going to get further rate cuts nor does one cut mean the US Fed is now in a cycle of lowering interest rates. The only thing that did surprise me was that a couple of members of the Fed wanted to cut the cash rate by half a percent and not the quarter-point cut that was agreed by most committee members.
It simply blows me away that most commentators and economists can consistently get it so wrong when all they have to do is listen to Jerome Powell and read his statement each month. But instead, they fall in love with their own BS story as to what they think the Fed should do because their view is “different” to the Fed Chairman’s and might get a headline. Most of the so-called experts are wrong the vast majority of the time and many of them are wrong because they have self-interest built into their narrative. Sadly, millions of investors around the world base their decisions on when to invest by listening to this “financial entertainment”.
Markets remain calm post the Fed minutes.
Currency markets continue to remain calm post the Fed minutes in the lead up to Jerome Powell’s opening address in Jackson Hole. The safe-haven currencies remained on the back foot as risk appetite was positive and the US Dollar continued to drift higher against the Yen. Every major base currency against the Yen has drifted to the upside and is sitting at the top of the trading range on the 4-hour chart.
Stocks were up in the US trading session and I suspect that trend will continue today through Asia with no high impacting data scheduled. The reason US stocks were higher was on the back of better than expected company earnings from some of the USA’s biggest retailers. Just another sign the US economy is ticking along just fine and the recession fears the market was spooked by last week remain very premature.
According to CNBC the CEO of Bank of America, Brian Moynihan thinks the U.S. consumer is strong enough to keep the economy growing. “The underlying consumer is doing well and making more money. More importantly, they’re spending more money,” he told CNBC’s Becky Quick, noting the bank’s consumer base has spent $2 trillion in 2019 thus far. “The U.S. consumer continues to spend and that will keep the U.S. economy in good shape.”
It does not pay to be a pessimist.
Expect to see some gaps on Monday.
With the Central Bankers conference in Jackson Hole running into the weekend and RBA Governor Lowe and other Governors due to speak over the weekend, there is the potential for some sizable gaps when platforms reopen on Monday.
If a Central Bank official says something at this event the market is not expecting or gives some forward guidance on policy that differs to what has already been priced in or spoken about, we could see some currency transactions amongst liquidity providers (investment banks) over the weekend and that is why we could see some gaps. For example, if you took a long position on the AUD v USD on Friday and had a stop loss at 0.6750 if the market gapped down to 0.6720 because of something Lowe said in his speech your stop loss would be filled at 0.6720, 30 ticks below your intended stop loss level.
There is an incredibly valuable lesson in this week’s currency price action.
The markets were extremely volatile last week and so far this week markets have calmed and price action is virtually non-existent on currency markets. So, what’s the lesson? The most influential Central Bank Governors and Presidents are gathering in Jackson Hole, Wyoming from today and most of them will be giving speeches over the course of the next couple of days. Central Banks are responsible for making the financial markets go higher or lower and with every major Central Bank looking to lower rates in the coming 12 months, investment banks and hedge funds have not been willing to place new large bets in the lead up to what could be volatile comments from Central Bankers.
It is so important as a currency trader you know when a market is likely going to be volatile and when it is likely going to be flat and learn to read an economic calendar. Whenever there is a significant event like this week’s event in Wyoming it just does not pay to try and trade an FX position in the lead up to the event. Let the volatility from the event cause a new impulsive move and build your trading plan around looking to enter positions in the FX market that are fundamentally and technically based into a new trending direction.
Friday on Money Exchange.
One of the topics for discussion on Money Exchange this Friday is the Japanese Yen and Swiss Franc. Why are they safe-haven currencies and what does “safe haven” mean anyway? I will answer these questions as well as share with you which major investment bank thinks global stock markets will make all-time highs in the first half of 2020.
I’ll also give you some tips on how to focus better when under pressure and why it’s important to ask yourself this question. Would you trust your trading plan with $5 million dollars? Join me live every Friday at 1.00pm AEST on the Train with Andrew YouTube channel.
Canadian CPI beats estimates.
The Canadian Dollar barely moved after the better than expected Inflation reading for the month of July. It goes to show just how anxious traders are to hear from the US Fed chairman as ordinarily, the Caddie would have found some support on the better than expected inflation numbers. There is a sprinkling of Euro Area economic data today that might get the Euro moving a few ticks but investment banks and hedge funds are waiting for Powell and other Central Bankers comments in coming days.
You are never too old to chase a new dream.
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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