Today’s Key Market Drivers: 3rd August 2018

“BOE says more rate hikes are a long way off.”

The Bank of England as expected lifted its official cash rate Thursday to 0.75% the first-rate increase since March 2009 nearly ten years on from the global financial crisis. As I mentioned in yesterday’s report the rate increase was 100% priced into the Pound and what the market was looking for was forward guidance from the Bank of England on when it will raise the official cash rate again. Not long after the statement was released Mark Carney the Bank of England Governor held a press conference and said further interest rate increases would be at a walking pace rather than a run. Carney also expressed concerns about Brexit and traders interpreted his comments to mean the BOE would leave rates steady for some time now.

The US Dollar benefited on Thursday from Donald Trump’s tough talk on trade suggesting the US may lift the current 10% trade tariffs on $200 Billion of China imports to 25%. Trump says that China has not met the USA’s demands and has introduced its own set of tariffs on the USA. This news sent emerging market currencies lower including the Chinese Yuan which touched a new 12 month low. Continued tough trade talk from Trump would likely add more downward pressure on the AUD with the local currency being a proxy for what is going on with China and the USA. China is Australia’s biggest export partner and if China’s economy is going to be damaged then traders will sell down the Aussie Dollar as a result.

Join me for Friday Live at 2:30pm AEST in the FX Trading room today.

The Yen gained strength through the European and US trading session as a general risk-off theme rolled over markets. The Yen always benefits in times of market uncertainty and currently from a technical perspective many base currencies that trade against it look weak. Friday still brings plenty of high impacting news with the official US unemployment report due in the US trading session. The Asian session will kick off on the back foot following a weak lead from the northern hemisphere markets. Australian Retail Sales are due at 11.30am and 15 mins later we will see the release of the China Caixin Manufacturing Index which has the potential to move the AUD also if out of line with expectations.

This morning I have entered a Sell Stop short order on the CHF v JPY based on a price rejection set up on the daily chart. Any traders short on the EUR v USD from last Friday should ensure they don’t allow a winning trade to turn into a losing one. More details in today’s video.

The current theme is risk off and emerging markets currencies are doing it tough. The US Dollar is the flavour of the day and if Friday’s job report impresses like the unofficial report did on Wednesday, then the US Dollar will likely see higher levels by the time the market closes on Saturday morning.

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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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