Today’s Key Market Drivers: 29th July 2019
Strong US growth figures help boost the US Dollar.
The US Dollar continued to gain momentum on Friday following far better than expected second-quarter growth figures. Economists were expecting the USA to have only grown by 1.8% (annualised), however, the official figures showed the US economy growing at 2.1%.
The US Dollar has been gaining steady momentum for over a week now as recent economic data has put a question mark on whether or not the economy is slowing as many suggested it was. Some of its major rivals the Pound, Euro, Aussie and Kiwi closed the week sharply lower with both the AUD and NZD firmly in a new trending direction to the downside.
Whilst the US Dollar will be the key driver of the AUD v USD and NZD v USD this week the Aussie Dollar does have a quarterly inflation figure to hurdle on Wednesday. Inflation data is the key barometer Central Banks use to gauge whether or not they will lower or raise interest rates and Wednesday’s 2nd quarter CPI figure for Australia if out of line with expectation could move the AUD v USD up to 1 cent or more in the hours and days following its release.
We haven’t seen a week of economic data like this in months.
This week’s economic calendar is about as busy as we could ever hope for. 28 high impacting economic data numbers and no less than 3 key Central Bank policy statements from the Bank of Japan, US Federal Reserve and Bank of England. We also have Euro Zone, Australian and Swiss Inflation data which will be key for the short-term direction of the base currencies. On top of that, we have the latest China manufacturing figures, GDP figures the Euro Zone, US Consumer Confidence and Personal Consumption data and to round out the week the latest official US jobs figures. And I have not even mentioned a slew of other medium and high impacting data that has the potential to shift financial markets.
You can learn so much from watching price action throughout the course of this week that will be a direct result of out of line with expectation data figures. You’ll have to wait until Tuesday before we get anything that has the potential to create an impulsive move and it starts with the BOJ’s statement in the Asian trading session and then German Inflation figures.
Stocks continue to shine as Alphabet and Starbucks beat earnings estimates.
Second-quarter US company earnings continue to beat analysts’ expectations with another stellar week of results last week. With such a strong US GDP figure on Friday, I would have expected the stock market to sell off given it might mean the Fed holds off lowering its official cash rate on July 31st. It appears the top end of town is not currently concerned about the potential for slower US growth in coming quarters and would rather focus on the “now” rather than the “later”.
I expect Asian stock markets to open to the upside today and follow the lead from Wall Street on Friday. There is no high impacting economic data today that will take the focus away from the current theme of strong US company earnings which is supporting stocks and the US Dollar.
What’s happening with the US / China trade deal?
It’s been a month now since the G20 summit in Japan when President Trump met with President Xi and said US negotiators would once again start discussions on a trade deal. Expectations were high a deal will ultimately get done however as time goes on there are more and more valid question marks being put on whether or not a trade deal could be abided by on the Chinese side.
Billion Dollar hedge fund manager Kyle Bass made a point on Friday that the Chinese will not want to be locked into any deal where they commit to not stealing US intellectual property. Bass essentially says the Chinese can’t be trusted and that a deal is impossible to reach. If a “deal” announced in the future disappoints markets than I would expect to see a sell-off on the Chinese currency and this would drag down the AUD and NZD.
New week = new beginnings. Make it count.
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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