Today’s Key Market Drivers: 4th February 2019

US Dollar rallies after stronger than expected jobs data.

Friday saw the release of the eagerly anticipated US January jobs figures which economists expected would show the US added 165,000 jobs in the first month of 2019.

Data showed the economy added a whopping 304,000 jobs and notched up its 100th month of jobs gains. The US Dollar initially rallied strongly on the surprise jobs numbers but the gains were muted when traders delved deeper to find the Labor Department significantly lowered December’s jobs figures and further analysis showed wages growth grew at a far slower pace than expected.

The Greenback did finish the week generally higher and with close to 70% of the stocks listed on the S&P 500 beating earnings estimates as the current earnings season continues the US economy is not yet showing any signs of the broad economic slowdown, many traders expect later this year.

China’s weaker than expected manufacturing numbers weighs on the Aussie Dollar.

China’s manufacturing sector continues to weaken with official China PMI data showing another contraction in January the most in three years according to CNBC. My longer-term expectation is that the AUD v USD will see well under 0.70c in 2019, however, I think the tipping point will be when US stocks begin their next leg lower and re-test the lows that were created in the 24 hours before Xmas.

The Reserve Bank of Australia will release its first policy statement for 2019 on Tuesday at 2.30pm AEDT. The RBA does not hold a meeting in January so traders will be keen to hear what the RBA thinks about the local economy. Recent inflation data showed a slight improvement but nothing close to the rise that needs to take place for the RBA to consider a rate increase. Housing stats show home prices are continuing to broadly fall across Australia with Sydney and Melbourne experiencing the largest declines. Wages growth remains virtually non-existent and household debt continues to climb at alarming rates.

The economy is in no shape for the RBA to remotely consider a rate increase, in fact, the expectation is growing that if China continues to weaken and this is followed by a slowing in global growth lead by the USA the next move for the RBA could be down not up.

The statement from the RBA on Tuesday is what traders will be keen to read as all leading economists surveyed expect the Central Bank to leave rates on hold at 1.5%.

Bank of England to report this week.

The British Pound has been well supported since the 3rd January when it hit its 2018 low and this week the Bank of England will issue its first statement for 2019. Brexit has been concerning the BOE who have openly said that once the break away from the European Union is sorted it would likely raise the official cash rate. The UK economy is performing well and Brexit remains the only hurdle in the way of the British Pound rallying higher particularly against the US Dollar and emerging market currencies.

If we see a deterioration in global growth the Pound will likely continue to perform well against the Aussie and Kiwi Dollars simply because there is a lot more Pounds circling the globe than Aussie and Kiwi Dollars and there is also a lot of debt denominated in Pounds.

Today’s economic calendar.

Australian Building Approvals numbers are set for release today at 11.30am AEDT which, if out of line with expectation, have the potential to move the AUD up to half a cent. My expectation is the market already has priced in weaker building approval numbers so I am keen to see the data released. There is no other high impacting news scheduled for the European or US trading sessions and with no major lead from the US on Friday Asian markets may open mixed.

The major data numbers this week for FX traders to digest is the Central Bank reports from the RBA and BOE as well as New Zealand and Canadian unemployment numbers.

Have an awesome week. AB

 

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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