Today’s Key Market Drivers: 6th November 2018

“US Mid Term Elections will likely increase volatility as results come out.”

Monday was a mixed trading session globally with Asian markets lower, the FTSE in London up and the DAX in Germany down. Markets in the USA followed suit with the Dow Jones and S&P 500 both finishing comfortably in the green but the tech-heavy NASDAQ sagged and closed down half a percent. There was also no high impacting economic data scheduled for Monday and with the US Mid Term Elections taking place many traders will be waiting to see if there are any surprise results which may help or hinder Donald Trump’s economic agenda in the second half of his first term as President.

The US Dollar was lower on Monday after traders elected to sell down long Greenback positions ahead of the Mid Term Election results. Polls show the Democrats may take control of the House of Representatives with the Republicans likely to keep control over the Senate. When Trump was sworn into office the Republicans had won control of both sides so if he loses his grip on Capitol Hill this may put a question mark over his “Make America Great Again” agenda and traders may choose to sell down the US Dollar as a result. Stock and currency markets can expect to see increased volatility in coming days.

It appears Brexit deals are finally getting closer to being done with rumours a Financial Services deal was agreed to last week and more rumours on Monday a customs deal was close to being finalised. A spokesperson from Theresa May’s office cautioned the press and said the rumours were speculation only. Nevertheless, the rumours have helped boost the Pound which last month was under mounting pressure as Brexit negotiations dragged on. The GBP v USD is well off its recent lows and sitting comfortably above its 200 EMA on the 4-hour chart. The next area of resistance is 1.3216 which is the 200 EMA on the daily chart. Any weakness in the US Dollar is going to benefit the Pound at present.

Today sees the release of the November RBA statement just prior to the running of the Melbourne Cup. Traders are not expecting the RBA to adjust the official cash rate today, however as always, the RBA’s comments within the statement are watched closely to see whether or not there is any forward guidance with respect to interest rates. The AUD rallied strongly last week on the back of the third biggest trade surplus on record and with housing prices continuing to weaken in the major capital cities it will only take an uptick in wages growth and inflation for the RBA to change its tune and signal to the market interest rates will rise in the future. We have not had the uptick in wages yet but I suspect it is not far away and I have recently changed my view and believe the RBA will raise the official cash rate in the first half of 2019. The moment they indicate this to the market the AUD is going to rally strongly. I have been a big advocate for the AUD continuing to fall against the US Dollar but I no longer hold this strong view. More on this tomorrow after the RBA’s November statement.

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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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