Today’s Key Market Drivers: 8th February 2019
Kiwi Dollar sinks on high unemployment figures.
The New Zealand Dollar fell out of bed yesterday morning following a far weaker than expected 4th quarter job figures. The official unemployment rate spiked from 3.9% to 4.3% in the 4th quarter of 2018 which gave traders another reason to believe the RBNZ will likely need to follow the RBA and change their tune with respect to the next rate adjustment. Just like the RBA traders have been expecting the next move on interest rates at the RBNZ would be up but with such a spike in the jobless rate, I will be keen to seen any follow-up data.
The NZD v USD closed convincingly below the 200 EMA on the daily chart on Thursday and the next level of support isn’t until 0.67c. Expect further falls in the coming weeks.
Pound falls sharply, then rises after BOE statement.
The Pound fell sharply following the Bank of England’s February statement that downgraded the economic outlook for the UK saying it will likely grow at the slowest pace since the GFC. This gave traders every reason to believe the BOE is now also in a holding pattern with rates and traders instantly priced in their expectation that we should not expect the BOE to raise them in 2019.
The sell-off was initially swift on the Pound until Governor Mark Carney said the BOE had not changed its mind with respect to interest rates. The selloff was then reversed and the Pound finished the day higher. Another great reason why you should not attempt to trade the news.
The BOE blames slowing global growth and Brexit uncertainty for the downgrade in their GDP estimates. The Central Bank in December said it expected the UK to grow at 1.7% in 2019 but now expects the economy to only grow at 1.2% and expects inflation will decline. I think it is safe to say the BOE is on hold for the foreseeable future until Brexit is sorted and the economy begins to improve further.
I still hold the view the Pound will finish 2019 sharply higher against the AUD, NZD and emerging markets.
The Yen is technically looking attractive.
The base currencies that trade against the Yen have been trading in a tight range for all of January and if we see another sharp pull back on US stock markets then we are going to see the likes of the AUD, NZD, CAD, EUR and GBP all weaken against the safe haven Yen and Swiss Franc.
US stocks lower on US / China trade tariff tensions.
US stock markets fell on Thursday after traders got concerned that trade talks between US President Trump and China President Xi won’t happen before March 1st and new US tariffs on China goods will automatically kick in. Traders assumed trade officials from both countries would resolve their differences before the truce on trade tariffs expired but that now appears unlikely.
The US and China agreed in December not to add any more trade tariffs on one another and committed to sitting down and working through their differences amicably. It appears little progress has been made and it was US and China trade tensions that added to the selling pressure on stock markets in October and November and drove the Chinese currency to fresh new lows.
The US Dollar will be the winner if a trade deal cannot be reached simply because the US holds the bigger stick. The AUD and NZD would accelerate their trends lower if tensions between the two superpowers rose once again.
Canadian Unemployment data will be closely watched today.
You saw the impact of an unexpected data announcement with the move on the Kiwi Dollar. The official Canadian jobs figures are due today and will give traders another reason to closely watch the Caddie. The official unemployment rate is 5.6% in Canada and leading economists expect the unemployment rate to climb to 5.7% when the data is released. If the official number is out of line with expectation, traders will buy up or sell the Canadian Dollar.
Great things take grind. Love the grind and be obsessed. 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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