Today’s Key Market Drivers – 25th September 2017

“I’ll drink to that.”

The Euro gapped lower this morning when platforms reopened following news Angela Merkel has won another term to be the Chancellor of Germany but just like the Nationals in New Zealand, Merkel must form a coalition to form a Government. Traders were concerned at one stage the biggest economy in Europe was headed for a new German leader however it appears Merkel and her Government will hang on to power albeit with a smaller majority. The gaps on the Euro are closing as I write but still have some work to do. The chart below shows clear divergence on the Euro v US Dollar and my 3-minute video today focuses on the potential for some new trends to develop.


The Pound was the biggest loser on Friday falling sharply after the ratings agency Moody’s unexpectedly downgraded the UK’s credit rating from AA1 to AA2 but at the same time changed its economic outlook from negative to stable. The Pound lipped against most of its rivals however unless other ratings agencies such as Standard and Poor’s also downgrade the UK I anticipate the selloff to be shallow and against currencies such as the Yen an opportunity for traders to reload for a longer rally higher. The BOE still could potentially raise the official cash rate from 0.5% before Xmas.

The Kiwi Dollar remained steady this morning as currency markets reopened following the countries national election on the weekend that was won by the incumbent National party winning the most votes but not enough to govern in its own right. It now must form a coalition if it wants to govern and the final results could be some weeks away. If the Nationals aren’t able to form a coalition then the Kiwi Dollar has the potential to fall as this would be seen as unexpected news and unstable for the economy. I would expect the Nationals will do whatever it takes to ensure the PM keeps his job.

The economic calendar shows the only Central Bank reporting this week is the RBNZ, which follows closely on the heels of the New Zealand national election which was held on Saturday. The market does not expect any change to the official cash rate 1.75%, however, comments from the RBNZ Governor at his press conference is what traders will be listening for. ECB President Mario Draghi speaks in Brussels on Monday but Janet Yellen’s speech on inflation and US monetary policy is likely to be the headline news the market gravitates towards early on Wednesday morning.

 

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 key-note 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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