Today’s Key Market Drivers: 6th June 2019
Is Australian already in a recession?
The latest Aussie quarterly GDP (growth) figures were released on Wednesday and showed a marked slowdown in the economy. Australian grew at just 0.4% in the first quarter or 1.8% annualised which is well under the long-term average and totally justified the official cut in the cash rate early this week. Talking to many Aussie business owners and they will tell you they feel like the country is already in a recession even though we have not had two consecutive quarters of negative growth for over 25 years.
The Aussie Dollar has pulled back 40 ticks from its Tuesday high of 0.7006 but the natural price action of the wave formation is showing we are in an ABC correction phase and the likelihood is another new high should be technically coming.
US private jobs report points to a US recession sooner rather than later.
It is considered to be a solid guide to private job creation numbers and if the ADP private jobs report is correct US businesses are not hiring at the previous pace and the stellar jobs numbers, we’ve been seeing in recent months will decline considerably. The report showed just 27,000 jobs were created in the month of May down from the 185,000 the market was expecting. The weaker than expected number only helped spur the US stock market higher with traders continuing to price in their expectation of weaker growth and ultimately a rate cut from the US Fed in coming months.
The official US unemployment figures are due on Friday and if they are anything close to the private number stocks will continue to surge higher and the US Dollar will likely take another leg lower.
European Central Bank to release a sombre statement today.
My expectation is the ECB will release a rather sombre statement today about the Euro Area’s economic outlook acknowledging global growth is slowing and the recent trade war tension between the US and China will have knock-on effects throughout the world’s largest economic region.
The market is naturally expecting the ECB to keep rates on hold at 0% so the devil will be in the detail of the statement and press conference that follows. My expectation is the Euro Area will need another round of stimulus and if traders get a sniff of this today, they will continue to sell off the Euro currency.
CNBC says, “Speculation that the ECB could possibly announce looser terms for a new cheap lending scheme sent German 10-year government bond yields to a record low of minus 0.230%.”
Central Bank chiefs speak in Japan.
The Governors of the Bank of Japan and Bank of England are making speeches today with BOE Governor Carney speaking in Japan. Whilst it is unclear what the two may say, the market will naturally be listening closely for any forward guidance on interest rates and their overall economic outlook.
In other news.
China’s latest Caixin PMI number missed the markets estimates coming in at 52.7 vs the 54.2 expected. The weaker than expected manufacturing reading along with the poor Aussie GDP numbers were the two catalysts for the pull back on the Australian Dollar.
US and Mexico fail to reach a deal on trade tariffs.
CNBC is reporting that US and Mexican officials have met at the White House this week but failed to reach an agreement after their first round of discussions. The Mexican Paso fell sharply last week following Tweets from Donald Trump saying that unless the Mexicans changed their immigration policy the US would be implementing 5% tariffs on goods imported from Mexico. Trump’s tweet added to the negative sentiment the market had last week, however, there is a new theme now and it’s all about lower interest rates at the Fed.
Don’t think outside the box. Take the attitude there is no box.
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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