Today’s Key Market Drivers: 3rd September 2018

“Aussie Dollar sinks to a new low as more banks in Australia raise rates.”

Markets finished the week in a general risk-off mode after rallying for the best part of 5 days before turning bearish on trade tariff fears. The Aussie Dollar was the big loser of the week touching a new two-year low against the US Dollar and falling sharply against all its major rivals as emerging market currencies were once again on the nose Friday. The sell-off on the AUD started around 3.00pm on Wednesday following NAB’s decision to lift its variable home loan rate citing increased funding costs. What we then saw on Friday was other banks follow NAB’s lead and also lift their home loan rates giving investment banks and hedge funds more reason to sell off the Aussie Dollar at a time global trade war fears were again back in the headlines.

With wages growth still struggling to keep up with inflation and millions of Australians only just being able to pay their mortgages what traders are pricing in is the likelihood higher rates forced on Aussie mortgage holders by the big banks could see them spend less, weakening the economy and only delaying further any potential official rate hikes from the Reserve Bank of Australia. The Aussie Dollar could be back in the high 60’s before the end of September and I just don’t see any respite for the local currency.

The market will start nervously this week as it waits to see if the US is going to impose more tariffs on China and Europe. Stock indexes are off their recent highs and the safe haven currencies gained on Thursday and Friday. Until the market gets some sort of clear direction from the Trump administration on when and what any new tariffs might be the current risk-off mood will continue. There is no high impacting news today, however, tomorrow sees the September RBA policy statement and on Wednesday we will get Australian 2nd Quarter GDP numbers. The likelihood is the Aussie Dollar will remain busy although the market is not expecting an interest rate adjustment from the RBA. In fact, traders are not expecting a rate adjustment until well into 2019 which makes the big banks recent rate hikes out of step with the official Central Bank.

When a new month begins we often see a new flood of money and this can change the mood of the market so I am keen to see how things get rolling Monday and Tuesday.

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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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