Today’s Key Market Drivers: 5th September 2018

“I love a winner who’s done it tough and finally makes it on the big time.”

The US Dollar was the stand out winner on Tuesday as financial markets remain concerned about a potential escalation in trade tensions and forced traders into buying the safe haven currencies once again. Emerging market currencies took another hit with the AUD v USD hitting a fresh two-year low of 0.7156 in the hours after the RBA September rate decision. The Reserve Bank of Australia as expected kept the official cash rate on hold at 1.5% and gave traders no reason to buy back into the Aussie Dollar for the long haul. The big retail banks have recently been raising interest rates for mortgage holders, however, the RBA hasn’t adjusted the official cash rate for a record 25 months. And the probability is they won’t adjust the cash rate in 2018 or the first quarter of 2019 unless we see a lift in wages growth and the property market continues to pull back. Whilst the current trade tensions remain between the US and China I expect to see continued demand for the US Dollar, Yen and Swiss Franc and a continued slide on the AUD and NZD. The Kiwi Dollar also hit a two year low of 0.6539 against the greenback.

The Pound vs US Dollar is an interesting currency pair to watch this week. The Pound gapped down 46 pips on Monday when trading platforms reopened and usually, we would see this gap close in the hours following. Traders love to try and trade these gaps and certainly, they are a high probability trade most of the time provided you are trading gaps bigger than 30 pips and can use a decent risk and reward set up. Recently I have been noticing something with these gap trades on a Monday that I may begin to trade personally in coming months.

Stock indexes are likely going to remain mixed today with no major lead from Wall Street and a general risk-off mood helping support the safe havens. The Aussie Dollar is going to see more volatility this morning at 11.30am AEST when we get second-quarter GDP figures which I suspect will struggle to beat the market’s estimates. If we see a weaker than expected GDP figure and then a poor China PMI reading 15 minutes later then the AUD v USD could be making more new lows. In the US trading session, the Bank of Canada is going to release it’s September policy statement and the Canadian Dollar will, therefore, be volatile. Traders do not expect the BOC to shift the official cash rate today, however, what they will want to see is forward guidance on when the Central Bank will lift rates again after already bumping them higher once this year. The Canadian Dollar has been under pressure recently due to Trump standing his ground on trade tariffs and today’s BOC rate decision may take some heat off the Caddie if it’s viewed as more hawkish than expected.

Any trade updates throughout the day will be sent via Trade Time. You can also follow my daily updates on Facebook, Twitter, Instagram by searching for TrainwithAndrew. Make sure you subscribe to the Andrew Barnett YouTube channel after watching today’s Sunrise video below.

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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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