Today’s Key Market Drivers: 29th November 2018
“Wait a second…he’s not so bad after all, I like him!”
In what could be a game changer in the medium term for stock and currency markets, US Federal Reserve Chairman Jerome Powell has signalled during a speech on Wednesday that the US Central Bank is close to where it needs to be with interest rates. Traders immediately began to price in the expectation the Fed may not raise rates in December and are currently only pricing in two more rate hikes in the coming 12 months vs the 4 they were expecting.
The US Dollar was sharply lower following Powell’s comments with the Aussie and Kiwi Dollars sharply higher against the greenback as the Asian trading session opens. US stock markets roared into life with the S&P 500 rising 2.5% for the day and pausing just below the 200 EMA on the daily chart. What has been causing the US Dollar to rise and stock markets to fall recently is US interest rates continually rising, however, the US Fed Chairman’s comments could be the end of the road for the US currency in the medium term and has the potential to send stocks back to their highs of 2018. The Fed was not going to be able to continue to raise rates at the same pace it has been for the past few years and Donald Trump will be licking his chops this morning after the man he openly criticized in recent days delivered just the speech the President was looking for. The Minutes from the latest US Fed meeting are due to be released today and may add more fuel to the fire that Jerome Powell lit on Wednesday.
The Pound and Euro were also sharply off their lows on Wednesday and this has everything to do with a weaker US Dollar and not strength in the Euro or Pound. Recently I commented that I had changed my view of the AUD and NZD and expect them to both rise in 2019 as the RBA and RBNZ move towards higher interest rates late next year. The rally that we have seen on both currencies in the past few hours could signal the beginning of a new trend higher. I also expect traders may see this as the opportunity to end the slide on the Euro and Pound and begin to move both currencies back higher as we head into December.
We must keep things in perspective and not get sucked into thinking we know where prices are definitively going next. The G20 summit is this weekend and has the potential to cause market volatility as does the ongoing trade war between the US and China. I urge you to remain neutral and just play your strategy with a high focus on risk management and execution. Don’t fall in love with a market direction but understand why a market is moving. Don’t be blind to just reading a set of charts, understand why price has shifted and the sentiment of the market. The four pillars of success are Fundamental, Technical, Risk Management and replicating the process of the execution of the first three.
Today sees the release of German CPI and Unemployment data and US Personal Income and Spending figures which neither will take the attention away from the current theme which is US Dollar weakness and stock market strength.
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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