Today’s Key Market Drivers – 28th August 2017

The Euro rallied sharply on Friday after Mario Draghi’s speech at the annual Central Bankers conference in Jackson Hole Wyoming. Draghi made no mention of the Euro’s rally in 2017 and its potential to hurt inflation so traders took this as a sign the ECB is satisfied the Euro’s value and its rise won’t reduce the likelihood of inflation stalling in coming quarters. The ECB recently mentioned the value of the Euro in its July monthly minutes but Draghi chose not to mention it again in Jackson Hole. Janet Yellen the US Fed Chair also spoke at the conference and gave no indication the US Fed would raise rates again in 2017, in fact, she didn’t utter a word about monetary policy staying well away from giving off any forward guidance. One thing that was noted was that Central Bankers were eager to remind the markets the financial system is safer than it has been in years.

The two speeches were what the market was waiting for after a lackluster week of high impacting economic news. This week is a different story with no less than 13 high impacting news announcements with 50% of them being US economic data numbers. Today the market will get a read on the latest US Trade Balance figures, Tuesday is high impacting data free but Wednesday sees the release of the 2nd quarter US GDP figures and the latest US Consumer Confidence numbers. Euro Area CPI is also set for release on Tuesday, which is what traders thought the ECB was concerned about with a rising Euro. The market is expecting a reading of 1.8% annualised so anything more than this will only see traders buy even more Euro’s.

For Australia and New Zealand there is no high impacting economic news due this week, however, New Zealand and Australia does have the latest Building Permits and Approvals data due Wednesday. Thursday could be an important day for the AUD with the latest Capital Expenditure data released, which I think should be slated as high impacting. Capital Expenditure data is a reading of what big business is doing with its capital and is a good guide to whether or not big business is hiring and spending.

Donald Trump is going to be ramping up his policy agenda in coming weeks and one of the key things he is going to try and get through Capitol Hill is his lower company tax reform plans. If Trump does succeed then this could be a turning point for the US Dollar as traders would likely view this as a real win for Trump’s languishing policy agenda. The US Dollar rallied strongly after Trump was elected on the back of his plans to reinvigorate the economy and inject huge stimulus programs. He hasn’t been able to achieve any of it yet but if he gets his tax reform bill passed then the markets may begin to gain more confidence in his administration and its ability to deliver on its promises.

 

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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