Today’s Key Market Drivers – 4th October 2017

The RBA as expected left the official cash rate on hold on Tuesday which is the 14 month in a row the Central Bank’s official interest rate has remained at 1.5%. Whilst the RBA remains concerned at the pace that household debt is outstripping income it is still widely tipped by economists that the next move from the Central Bank will be up in 2018. The RBA noted demand for the Sydney housing is easing and we recently saw the first price fall in the harbour city market in 17 months. The AUD has recently fallen to a 3-month low of 0.7785 with the next level of support 0.7730. This is more on the back of US Dollar strength than AUD weakness. If you would like to read the statement from the RBA you can click on the following link http://www.rba.gov.au/media-releases/2017/mr-17-21.html

Traders have started to take profits on their long US Dollar positions leading into the typically volatile US Non-Farm Payrolls data announcement on Friday. The US Dollar has rallied for 3 straight weeks from its lows and expectations are the highs have not yet been hit and the Yen will weaken further in coming months. The US Fed is widely tipped to raise the official cash rate again in December as they did in 2016 and traders have been pricing in their expectation by pushing the value of the US Dollar higher. Janet Yellen is today speaking at a Community Banking event and if she does comment on monetary policy she is unlikely to suggest anything in my view that would see traders sell the US Dollar. It would be highly unusual for her to deviate from her recent comments.

The Euro has been off its highs now for a month and this coming Thursday at 9.30pm ECB President Mario Draghi is speaking on monetary policy. In his last statement, he told the market that the ECB would likely begin to wind back its current stimulus program starting in October so the market is now looking for a reason to buy back the Euro Area currency once it knows how much stimulus the ECB will taper. If Draghi surprises traders and winds back the stimulus at a greater pace than the market expects we will see the Euro rally back higher. The opposite is true if the ECB disappoints and winds back less than what traders are expecting. Always keep in mind investment banks, hedge funds and large speculators buy or sell currencies with gusto on unexpected news announcements. For example, if the ECB was to announce that it had changed its mind about when it will wind back the stimulus program and says it will start in January 2018 then that would be unexpected and traders would have reason to sell the Euro lower on the disappointing news.

Today’s economic calendar shows no high impacting news, however, a news announcement marked as medium can still move the market if the outcome is out of line with expectations. That’s why you should make it your business to know why the market is moving. See below the calendar shows Importance, Actual (what is announced) Forecast (what economists expect) and Previous (what the data announcement was last time it was released).

 

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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