Today’s Key Market Drivers: 30th August 2018

“Pound surges higher after news breaks about positive trade discussions with the EU.”

The Aussie Dollar took a dive lower around 3.00pm AEST yesterday following Westpac’s decision to lift home loan interest rates citing higher funding costs. Investment Banks and Hedge Funds have taken a dim view of this with respect to how it could negatively impact the Australian economy or more to the point how it will impact the millions of Australian mortgage holders who currently have interest-only loans (approx. 40%) that will soon switch to principle and interest. The added financial pressure put on mortgage holders has the potential to negatively impact the local economy with consumers electing to stop spending. It has been my view for over 12 months the probability of Australia having a recession as a result of this mortgage crisis is real. I find it ironic that whilst making over $4 Billion Dollars in profit per year Westpac is now crying poor that its funding costs are rising and are immediately going to pass on those costs to its customers at a time when wages growth is non-existent and the Reserve Bank of Australia has not adjusted the official cash rate for over 2 years and won’t likely adjust the cash rate in the coming 9 months. Leigh Sales on the ABC last night interviewed the head of Westpac and when asked about why the bank is putting up its interest rates whilst making billions in profits his answer was frankly lame.

The Pound spiked higher on Wednesday after news broke the UK was making positive progress on a trade deal with Brussels. My expectation has been for some time now that the UK would conclude a deal with Brussels and when it did the probability was the Pound would begin to reverse its 5-month slide lower. I am now actively looking to long the Pound at any opportunity that meets my Technical plan.

There appears to be nothing stopping the positive mood in financial markets this week (expect the unexpected) with US 2nd quarter GDP data beating market estimates coming in at an annualised rate of 4.2%. The US Dollar rallied strongly against the Yen with US stock indexes once again pushing to new all-time highs and risk appetite only increasing. Today’s Asian trading session will kick off on a positive note following the lead from Wall Street. The Aussie Dollar may get volatile this morning with the release of Building Approvals data and well as the latest quarterly Private Capital Expenditure report at 11.30am AEST. If out of line with expectations the AUD could move up to half a cent. German unemployment and inflation data, Canadian GDP and US Personal Consumption data are due for the European and US trading sessions which I believe overall will continue to support a risk on mood. What’s the main catalyst for the positive moves higher on stocks and risk assets? Positive trade talks between the US and its trading partners is the major reason.

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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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