Today’s Key Market Drivers: 25th January 2019
European Central Bank keeps policy steady but downgrades Euro Area economic outlook.
The ECB, as expected, kept its benchmark interest rate unchanged at 0% and delivered a statement that was a little more bearish than some traders expected. With recent Euro Area economic data being on the soft side Mario Draghi was certainly not expected to deliver an upbeat assessment of the European economy but delivered a slightly more sombre outlook saying the ECB acknowledges inflation is lower than where it needs to be and it is now reducing its economic outlook for the balance of this year.
The Euro was lower post the statement but Draghi’s comments really only repeated what the IMF said earlier this week at the World Economic Forum in Davos. Whilst I am bullish on the Euro vs the US Dollar because I don’t expect the Fed to raise rates in the first half of this year, I am more than prepared to change my fundamental view if the data suggests it.
The British Pound continues to rally on the hopes a Brexit deal is getting closer.
It was not official and once again is only a rumour but a British newspaper is reporting the Northern Ireland Democratic Unionist Party is willing to compromise on a new Brexit plan being put together by Theresa May. One of the most contentious issues surrounding Brexit has been the border between Northern Ireland and Ireland which currently has no wall, fence or immigration and border checks.
The Pound has been steadily moving higher after reaching a low in late 2018 but if the Unionist Party does give conditional approval to Theresa May’s Brexit plan, we may finally be about to see a resolution which I believe will be extremely positive for the Pound.
It’s ok to change your mind as a trader.
In fact, I would go as far as to say it is imperative that a trader regularly changes their mind about their fundamental directional view or they risk falling in love with a direction and will miss money making opportunities.
My trading plan attempts to dovetail my fundamental and technical view together, such as my current view about the Aussie Dollar going lower. However, if there is a valid reason why my view should change then I will do so in a heartbeat.
I am certainly never in love with a direction in the market but when a technical and fundamental view matches it must be traded. Currently I have the view that US stocks markets in the USA will come back and test their lows that were touched just prior to Xmas, however, if the USA and China do a trade deal and global growth once again begins to pick up then a move back towards the 2018’s highs on stock markets would be likely.
You must be flexible as a trader but the most important thing is that you are not changing your view because you are emotional about a trade position. A changing view must be factually based and not emotionally based and sadly many traders change their mind, exit positions or jump out of trades because they are looking at their profit and loss. The market could not care less about any trader’s profit and loss position and you should never change your mind based on money, it should be fundamentally based.
US Commerce Secretary says the US and China are miles away on a trade deal.
US Commerce Secretary Wilbur Ross said on Thursday that the US and China were “miles and miles” from doing a trade deal and both countries had “lots and lots” of issues.
If there is a theme in the market right now that traders are focused on more than anything else it is the US and China trade dispute. Whilst US company earnings for the final quarter of 2018 are showing solid results, that may change in future quarters with the combination of higher interest rates, trade tariffs and slowing growth. Slowing growth in the fourth quarter of 2018 does not seem to have hurt the jobs market yet with the lowest number of weekly jobless claims being filed in 49 years.
The market is pricing in the US Fed will not raise rates in the first half of 2019 and this is one of the reasons why the greenback has been struggling recently against some of its rivals including the Pound.
Morgan Stanley warns the US Government shut down could be extremely negative for the US economy if it drags on.
Major US investment bank Morgan Stanley has issued a statement on Thursday saying that if the current US Government shut down was to drag on for a number of months it would be extremely negative for the US economy. CEO James Gorman said. “If it goes on through months of this year, it’s going to have an extremely damaging effect on the U.S. economy.”
As I write this Friday’s GoldRock Insider Report a news article just flashed up on my screen saying the White House is trying to negotiate with the Democratic-controlled Senate demanding a large down payment for its border wall.
Have a wonderful long weekend.
There will be no GoldRock Insider Report on Monday due to the Australia Day long weekend but if I decide to enter or adjust any trades on I will send the details out via the Trade Time App. There will be no Sunday PreMarket Prep Video, however, I will put together a longer Tuesday Technical Video Update to ensure you are up to date on where things are technically and fundamentally. Don’t forget Friday’s technical video update is your weekly Wave update so be sure to view today’s video.
Train your mind to be stronger than your emotions. AB
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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