Today’s Key Market Drivers: 6th February 2019

Trump’s State of the Union speech will keep the US Dollar busy.

At 1pm AEDT today, President Trump will deliver his delayed annual State of the Union address where it is widely expected he will discuss the China / US trade tensions, his border wall with Mexico and declare victory over ISIS.

My expectation is the US Dollar will remain volatile through his speech as traders inside investment banks and hedge funds look to trade his comments as they roll off his lips. I expect Trump to use his State of the Union speech to reaffirm his commitment to getting the money he wants for his promised border wall. Trump recently weakened and agreed to open the US Government for 3 weeks whilst continuing negotiations with Democrats on an extension to the budget that includes the money he wants for his wall. I think Trump will be prepared to see the Government shut down again in coming weeks and will dig his heel in when it comes to demands.

My expectation is that any talk of positive trade outcomes with China during his State of the Union speech will be US Dollar positive. Look for increased volatility on the US Dollar around lunchtime today.

RBA disappoints those traders expecting a dovish statement.

The Aussie Dollar spiked higher after the RBA released its January statement confirming it has left the official cash rate on hold at 1.5%. Traders were expecting a more downbeat assessment of the economy and were positioned short leading into the statement.

Whilst the RBA did acknowledge the obvious challenges the economy will face in the coming 12 months it did not give any reason for traders to short the AUD on the expectation of a potential rate cut. With so many traders positioned short and unwinding those positions post the statement the AUD quickly rallied higher. The gains were muted as the US Dollar gained traction through the European and US trading sessions.

Euro Area business conditions deteriorate to multi year lows.

The Euro was lower on Tuesday after a business conditions survey showed businesses throughout Europe expanded at their slowest pace in over 6 years. The Euro vs US Dollar is stuck in a multi-month-long trading range and anyone trying to make money trading the Euro v US Dollar would, in my opinion, be better off looking to other currency crosses until we see a break in the range.

I don’t expect the US Fed to raise rates in the first half of 2019 and therefore any move higher on the Euro against the US Dollar would more than likely be a result of weakness in the greenback rather than strength in the Euro.

Successful people make decisions on where they want to be and don’t base their decisions on their current situation. 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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