Today’s Key Market Drivers – 26th October 2017
Durable Goods are products that last more than 3 years.
Even with stronger than expected US Durable Goods data on Tuesday coming in a 2.2% vs the 1% traders expected many decided to book profits on long US Dollar positions and lighten up on their stock portfolios sending the Dow Jones 116 points lower, its biggest one day fall since early September. There was nothing wrong with the economic data out of the US Tuesday with new home sales data also beating the market’s expectations. US third-quarter GDP data is due on Friday with traders expecting a reading of 1.7% so anything either side of this number will see traders buy more or sell more greenbacks.
The Bank of Canada as expected left its official cash rate on hold at 1% which sent the Canadian Dollar sharply lower. Today it’s the ECB’s turn to tell the market what its plans are with respect to its stimulus program with traders widely expecting the ECB to announce it will taper the artificial magic money printing program from 60 billion to 40 billion Euro per month. Draghi said in 2012 the ECB would “do whatever it takes” and has since magically created hundreds of billions of Euro’s artificially on a computer and bought the government bonds of broke European nations such as Greece. The ECB believes these countries should in time be able to survive on their own two feet without the ECB having to lend it money at the ECB’s family-friendly rate of close to 0%. The theory is European nations should be able to raise money on their own without the market pushing the interest rate they need to pay to levels beyond their ability to pay like they did to Greece a few years back. Today’s announcement will be a key driver for the Euro in coming days.
The Pound rallied around 7.30pm AEDST Tuesday after 3rd quarter GDP figures beat market estimates coming in at 0.4% vs the 0.3% the market expected. Many traders are tipping the Bank of England will raise the official cash rate in the UK for the first time since the GFC when it meets next week. The Aussie Dollar took a dive earlier in the day following worse than expected CPI data. Traders were expecting quarterly inflation in Australia to be 0.8% but data showed inflation rose just 0.6% which annualised is 1.8% well below the RBA’s 2% minimum target. The RBA would prefer inflation to sit between 2% and 3% so a reading well below 2% isn’t going to move them to raise rates anytime soon. I commented a few weeks ago the AUD v USD would struggle to hold up under the weight of the US economy firing and the Aussie economy flat-lining and yesterday’s CPI reading has given it that kick back lower that could see a trend change back towards 0.70c.
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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