Today’s Key Market Drivers: 9th August 2018
“Kiwi Dollar sinks as RBNZ confirms it’s keeping rates on hold until 2020.”
The Kiwi Dollar has fallen out of bed this morning after the RBNZ released it’s August monetary policy statement and said the following…
“The Official Cash Rate (OCR) remains at 1.75 percent. We expect to keep the OCR at this level through 2019 and into 2020, longer than we projected in our May Statement. The direction of our next OCR move could be up or down.”
The above statement was immediately seen as a sell signal for the Kiwi Dollar and is the reason why traders have sold it down so sharply in the minutes following the 7.00am AEST release. I have been short on the Kiwi Dollar for over a month now looking for a dovish statement from the RBNZ and with it now committing to keeping the official cash rate at 1.75% until 2020 there is simply no reason why traders would want to hold NZD over USD. If history is any guide the selling pressure will likely continue on the Kiwi Dollar for the balance of this week. I have added to my overall short position on the Kiwi Dollar this morning at the price of 0.6700 with a wide stop loss of 0.7082 and profit target open. The overall statement was far more negative than positive and if you care to read the full RBNZ statement (takes 3 mins) you can click here.
In other overnight news, the Chinese have announced their own set of tariffs on US goods and this is the reason why the AUD has bounced back higher along with emerging market currencies. China is striking back at the USA with 25% tariffs on $16 Billion worth of US goods. The Pound continues to make fresh new lows on continued Brexit fears. The reason why traders are continuing to sell down the Pound is that they fear the deadline for the UK to officially leave the European Union will come and go without a firm trade deal being reached. The Canadian Dollar dipped on Tuesday following Canada’s public spat with Saudi Arabia. CNBC reports that the CAD was sold off on Tuesday because the Financial Times in London ran a report that Saudi’s Central Bank and Pension Funds had instructed their overseas asset managers to sell down Canadian Dollar assets. Such a move would likely put downward pressure on the Canadian Dollar. The Caddy did recover some of the lost ground through the US session on Wednesday.
Today sees China’s latest CPI data released which isn’t likely going to impact financial markets. Friday is the day the market is now waiting for with the UK’s latest GDP figures and US Inflation data due. If US inflation data beats the markets estimates it may give traders a reason to buy back into the greenback. I doubt the UK’s GDP figures no matter how good they are will turn the tide on the Pound and until a trade deal is reached with Brussels it will continue to remain under pressure.
The theme this morning is around the RBNZ’s very dovish statement on its interest rate and I would suspect the overall selling pressure will continue in coming weeks. Asian stock markets may be a little stronger today with the Chinese flexing their muscles on their own tariffs, however, I still hold the longer term view the AUD, NZD and emerging market currencies will continue to slide lower in the second half of 2018 against the US Dollar as US interest rates rise.
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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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