Today’s Key Market Drivers: 5th February 2019

RBA to keep rates on hold today.

Keep a close eye on the AUD today at 2.30pm AEDT when the RBA releases its first policy statement for 2019. Traders do not expect the RBA to adjust rates, however, what they are eager to read about is how the RBA views the local economy and if inflation is likely going to rise or fall over coming quarters. I believe the RBA is going to need to comment on slowing growth in China and the potential for a global economic slow down in 2019. The bottom line is if the RBA is more bearish in its statement than traders expect, the AUD will be sold off.

I cannot see how the RBA could make a case for being overly hawkish given inflation remains stubbornly below 2%, wages growth is non-existent, consumer debt remains at alarming levels, housing numbers continuing to decline everywhere and a 22% decline in building approvals numbers from the same time last year was released just yesterday. The next move from the RBA is now more likely down than up but today they will keep the official cash rate on hold at 1.5%.

Pound falls on Brexit concerns.

Ongoing concerns surrounding Brexit and British PM Theresa May’s ability to negotiate changes to the recently voted down exit agreement saw the Pound sold lower on Monday. The UK has until March 29th to find a way to exit the EU constructively or risk a hard Brexit and crash out of the EU without any broad agreement with its biggest trading partners.

Thursday evening at 10.00pm AEDT is when the Bank of England will deliver its February policy statement which I expect will acknowledge the potential for growth in the Euro Area to slow in 2019. I don’t expect the BOE to change its stance on wanting to raise rates but Brexit needs to be sorted out and the continuation of positive economic data needs to occur in the UK… And Andy Murray needs to play one more tennis match at Wimbledon.

Traders are expecting the US Dollar to remain strong.

CNBC reports this morning that the latest positioning data showed speculators increased their net longs on the U.S. dollar to their highest since December 2015, according to calculations by Reuters and Commodity Futures Trading Commission data.

Australian Trade Balance and Retail Sales numbers due today.

The Aussie Dollar will be busy today with not only the release of the latest RBA statement but also Trade Balance and Retail Sales data at 11.30am AEDT. Always keep in mind a currency will be sold off or bought higher when a data number is out of line with what leading economists expect. These economists are surveyed in the lead up to the data release and their expectations are published on economic calendars for the market to see. For example, Retail Sales is expected to have grown by 0.5% in January from the previous year and therefore if the number is less than 0.5% this suggest Australian’s are spending less which is not a positive sign and therefore the AUD would be sold off lower depending on how much weaker than 0.5% the number is. The opposite occurs if the data number beats estimates.

Canadian Dollar takes a breather as Oil prices fall.

The Canadian Dollar has been rising strongly in recent trading session thanks to higher Oil prices however the price of crude fell on Monday and so did the Loonie. Traders are expecting the Bank of Canada will raise rates again in 2019 but an uptick in inflation needs to occur and higher Oil prices would certainly go a long way to helping lift Canadian CPI. Do you know why traders call the Canadian Dollar the Loonie? It’s a bird that is featured on the Canadian one-dollar coin.

Great opportunities in life have to be seized. 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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