Today’s Key Market Drivers – 2nd August 2017

The Kiwi Dollar suddenly dipped lower this morning after the latest jobs report fell short of economists expectations and this only adds weight to comments previously made by the RBNZ Governor Graham Wheeler that interest rates in New Zealand may need to go lower in the coming 12 months. Traders have already been pricing in the potential for a lower Kiwi Dollar and today’s weaker than expected employment report coupled together with a poor inflation reading last month all points towards the RBNZ being the only major Central Bank globally that may need to lower the official cash rate in the coming 6 months. The Kiwi Dollar has recently been on the rise against the US Dollar, however, this has not necessarily been Kiwi Dollar strength and more relates to US Dollar weakness. Neither the RBNZ nor RBA wants higher currencies and in recent years have been cheering the US Dollar higher.

Political uncertainty in the USA is now threatening to spill over into economic uncertainty unless Donald Trump can right the ship that currently appears to have a number of leaks. The US Dollar continues to remain under pressure albeit off its lows on Tuesday. Traders are currently pricing in a 46% chance the US Fed will raise interest rates in the month of December. The market priced in all of Trump’s stimulus plans early in the year and as one trader put it aptly this morning. “The market has now priced out Trump’s policy agenda.

The Aussie Dollar initially rallied on the release of the RBA’s monthly statement Tuesday but has since pulled back after recent buyers took profits and read through the RBA statement issued at 2.30pm AEST yesterday. The statement gave no real indication of when the RBA will move on interest rates. Two things are clear, however, the likelihood of the official cash rate going down is currently next to zero and the timing of when the next rate hike will occur is likely well into 2018. I think any dips on the Aussie Dollar are going to be seen as buying opportunities in coming days and weeks provided Trump continues to do what he’s doing. Implode!

Looking ahead to today’s economic calendar Australian Building Approvals numbers are due out this morning at 11.30am AEST and whilst the data is marked medium impacting, if out of line with expectations it will see the AUD react. There is nothing significant through the European trading session, however, traders will be keen to see the unofficial ADP private US employment report when it is released in the US trading session. The Bank of England is the next major Central Bank to report its monthly statement and this is due on Thursday evening AEST.


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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