Today’s Key Market Drivers: 22nd March 2019

S&P 500 rallies to new 2019 highs.

Thanks to the stock Apple and the US Federal Reserve’s decision to leave rates on hold for the balance of 2019 US stock indexes rallied to new 2019 highs. Apple benefited from the news after investment bank Needham gave it a “buy” recommendation and coupled together with a market that feels secure in knowing rates aren’t going higher stocks were on the move. The Dow Jones surged over 200 points and the S&P 500 closed up 1.09%.

The housing market in the US is set to benefit from rates being on hold for longer with a fixed 30-year home loan dropping from 5% in November to 4.34% today. Interest rates were on the rise in late 2018 as the US Fed signaled it was going to continue to raise rates, but that has all changed now and the shackles are off, Trump has got his wish and the US consumer is breathing easier. Repayments are not going up this year.

Aussie Dollar pulls back after a whipsawing 24 hours of trading.

The AUD v USD rallied strongly on Thursday morning following the Fed’s decision to leave rates on hold for 2019 but the spike in the local currency was short lived. February’s official unemployment report showed fewer Australian’s are looking for work and the participation rate fell which was the reason why the unemployment rate dropped to 4.9%. Don’t take notice of the unemployment rate, the devil is always in the detail and the bottom line is fewer people are looking for work and only 4600 jobs were created in February vs the 39,000 created in January. The Aussie Dollar reversed its early morning gains and is now trading back below its pre-Fed statement levels.

Home builders have started to lay off workers down under and the trend is only going to continue. Melbourne house prices have dropped 9.6% from their highs in 2017. The building industry accounts for around 8% of Australian GDP and demand in the homebuilding sector is said to have dropped by up to 30%.

US Stock Indexes fail to fire post the Fed’s statement.

Why didn’t stocks rally post the Fed’s dovish March statement? Interest rates will remain on hold for the rest of 2019 so repayments on borrowings shouldn’t rise. But! The question now is what will company earnings do in the face of the Fed’s expectation that global growth and inflation will likely moderate and this will also impact the US economy.

It is my view this morning that stocks didn’t fire because traders are now taking the pulse of US companies and trying to figure out for themselves what impact a slowing global economy will have on US company earnings going forward. I am not saying stocks can’t rise from here, I am just saying the market is concerned enough to do some more homework before piling into or adding to current long positions.

Canadian and Japanese CPI is due today.

It is unlikely the Japanese inflation number today will move the market’s sentiment on the Yen but certainly, the Canadian inflation number has the potential to move the CAD when released at 11.30pm AEST Friday. Japanese inflation has been stuck at multi years lows for over a decade and in most instances, the market takes virtually no notice of its inflation reading when reported. The market knows it’s not likely going to move much.

The Bank of Canada signaled this month it expected inflation and growth to weaken in 2019 so the market will eagerly watch to see if the inflation number today is out of line with expectations. The market is expecting a year on year reading of 1.4% so anything either side of this will be market moving and traders will buy up or sell off the currency.

Loyalty is very much appreciated.

I want to express my sincere appreciation to EightCap who showed 100% loyalty to me and in turn LTG GoldRock members on Thursday. Not 30% or 40%, 100%. Rare in this business and what goes around comes around.

Remember, most of your stress comes from the way you respond.



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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