Today’s Key Market Drivers: 8th October 2019
Big money is bored.
Financial markets started the week on the back foot with US stock indexes lower and safe-haven currencies broadly supported. My expectation that the US Dollar would continue to weaken in the first few days of the week has so far proved to be inaccurate as the market’s concern over US / China trade relations has seen the greenback act as the usual safe haven when markets get nervous.
Today’s economic calendar is free of any high impacting economic data although BOE Governor Mark Carney and US Fed Chairman Jerome Powell are due to speak at separate conferences in Tokyo and Denver. The US economy has recently shown some signs of weakness and traders will be keen to hear from the US Fed Chairman today after Trump called him and his committee “clueless” when it comes to US interest rates.
Traders are expecting to see the US Fed drop its official cash rate in October and my expectation is that as the month drags on US economic data will show the economy is slowing and this is why I expect the US Dollar to remain under pressure.
US / China trade talks set to resume on Thursday.
With US / China trade talks set to resume this week, I expect they will quickly become the markets major focus and theme for the next week or two. Nobody knows if the talks will reap any change to the current trade tariff war but one thing is clear if negotiations go smoothly and President Trump says a deal is in the “works” it would be a positive sign for stocks and emerging market currencies such as the Aussie and Kiwi Dollars.
US markets have now closed lower for 3 straight weeks.
Each time the US stock market has closed lower for 3 straight weeks in the last 3 years further declines occurred in the following weeks and this is another reason why I remain cautious about the US economy.
A greater number of investors have recently been shifting money out of stocks and into fixed income and the stock market rally that J P Morgan predicted a month ago is failing to take off. The process of analysis rarely changes because human beings rarely change the way they act as a herd.
The back half of the week will create some market moves.
The market will heat up as the week goes on with the first piece of high impacting data coming at 4:00am AEST Wednesday with the release of the US Federal Reserve Minutes. What traders will be looking for is any sign of forward guidance from the Fed on its next interest rate move which is being priced into the market for October. If the Fed Minutes suggest otherwise the US Dollar will be volatile post 4:00am AEST Wednesday.
In other news.
Today sees a slew of medium impacting news including an Australian Business Confidence Number, a set of China manufacturing figures, German Industrial Production and Canadian Housing Starts. Unless substantially out of line with expectation I don’t anticipate any of these data numbers to produce any impulsive moves in currency markets.
I am unsure of what impact Bank of England Governor Mark Carney will have on markets when he speaks in Tokyo today. He’s speaking on the subject of climate change which seems odd given he is a Central Banker. The market will be more interested in hearing any comments about the UK economy and if the BOE is moving towards lower interest rates.
It takes nothing to join the crowd. It takes courage and sacrifice to stand alone.
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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