Today’s Key Market Drivers: 29th August 2018
“S&P 500 touches 2900 for the first time and drives emerging market currencies higher.”
Have you heard of the term risk appetite? It is when Investment Banks and Hedge Funds are feeling positive about the outlook for riskier investments such as shares and currencies. They actively invest in these sectors of the global economy when they are feeling upbeat and also invest in emerging markets, which helps boost currencies such as the Euro, Aussie, and Kiwi Dollars.
Wednesday saw the recent positive risk appetite continue to flourish after the US concluded a new trade deal with Mexico on Tuesday and traders have no reason to currently fear a global trade war. The S&P 500 touched another record high reaching 2900 for the first time and this positive risk appetite is seeing the safe-haven US Dollar sold along with the Yen. It is my view the current new highs on US stock indexes is going to cause an overcrowded long market and a pullback in coming days, whilst likely only shallow (not a major correction) is a genuine possibility. Pullbacks are healthy corrections in trends and give traders an opportunity to get long or short where technical value propositions exist. Now is when novice investors get burnt entering late and backing the market they trade to continue to go higher in the short term and overleverage their account.
It appears that Trump’s bark isn’t as big as his bite. His trade threats initially seemed scary to the market but what we are now seeing is the US negotiating trade deals with Mexico, Canada and Europe and what the market initially saw as a potential major global trade war is likely going to conclude with sensible trade deals with all countries Trump threatened. I suspect even the US and China will after some more push and shove agree to a trade deal that both sides are willing to swallow and Trump will eventually celebrate the release of a US Pastor once Turkey realises holding him isn’t worth the negative impact on its economy and currency value.
The economic calendar for the Asian trading session is once again lacking high impacting news so markets will kick off bullish after another positive lead from Wall Street. Private Capital Expenditure and Trade Balance numbers are due for Australia at 11.30am AEST, however, I don’t expect these will be substantially out of line with expectations to shift the AUD into a new downtrend. The two major data numbers for Thursday are Canadian and US 2nd quarter GDP figures which have the potential to add to the current positive risk appetite.
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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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