Today’s Key Market Drivers: 29th October 2018

S&P 500 Stock Index is now in correction mode 10% off its high.” (pic CNBC.com)

The week ahead is jam-packed with high impacting economic data and this may give traders a reason to switch their attention from stock/currency correlations to other matters such as two key Central Bank reports, a slew of inflation data and the US and Canadian official jobs number on Friday. The past two weeks have been dominated by stock index movements and the trend lower on stocks continued on Friday with the S&P 500 falling by 1.73% and now officially in correction mode which means it has fallen 10% from its peak.

The US Dollar usually rises against the AUD, NZD, EUR and GBP when stock markets are correcting and acts as a safe haven currency when there is financial instability on stock markets. This did not happen on Friday because the 10 Year US Treasury Yield fell back to 3.07% and the Core PCE number (an inflation gauge) came out below the market’s expectations and has put a question mark on whether the US Fed will raise rates in December. The falling US 10 Year Treasury Yield means there was less demand for US Dollars and after the inflation reading missed estimates traders began to sell the US Dollar and price in their expectation the Fed may hold off until early 2019 before its next rate hike. If stock markets continue to weaken and US consumers get nervous and slow their spending, then the expectation will continue to grow the Fed will hold off raising rates in December. So, the AUD, NZD, GBP and Euro were higher against the US Dollar on Friday because of a weaker greenback not because of the 4 base currencies strengthening.

The economic calendar shows US Consumption Expenditure as the high impacting data number for today. Nothing is scheduled in the Asian or European trading sessions that are going to get the market’s attention so we will need to wait until things get cracking on Wall Street to see if they want to try and rally stocks higher or continue the sell-off. I suspect the Asian trading session will remain generally weak after a lower close in the US Friday and this will likely offer support to the Yen in the short term but it all depends on what the US 10 Year Treasury Yield does when bond markets reopen for the week.

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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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