Two of the main forces that are currently driving the markets, or pulling them back and forth, are the US/China trade negotiations and the health of largely the US and Eurozone economies but also the world economies in general. There appears to have been progress in the US/China trade talks or at least there are encouraging reports coming out so we’re hopeful that we will have a resolution around this in the near future. Though it has been somewhat chaotic and a little unsettling there isn’t anything that the current administration has done that is necessarily a problem, the problem is why any of the past administrations didn’t do anything about it sooner. It seems clear that they may have not wanted to cause a conflict or look like the bad guy but this is a situation that has persisted for decades, hopefully, it will get resolved soon or at least get pushed in that direction.
There’s clear evidence that the Eurozone economy is slowing down and in fact numbers just barely missed showing that some major participants are entering into a recession. Though the US economic numbers did not come out as strong as what was expected or hoped for, those numbers reflect the end of the 4th quarter of 2018 when the US stock market was falling, the trade war seemed to have no resolution in sight and the Government shutdown was looming. Since then the Government has reopened with this week’s shutdown being averted, there is reason to hope for a good outcome to the trade war and the stock market has made back well over half of what lost during the fourth quarter of last year. Comparatively speaking the US economy may be in a little better shape than the Eurozone economy, look for continued USD strength against the EUR.
There were two good sized spikes in currency pairs this week which both demonstrate how vigilant traders need to be. One of the events that caused one of the spikes was largely unpredictable which is why traders need to protect themselves while still trying to maximize gains. There was talk that a large GBP futures trade of 2,000 contracts went through causing a 75 pip move in less than 5 minutes on Wednesday morning. A 75 pip move in less than 5 minutes is not necessarily all that unusual and it is certainly not unheard of but the reason that the move occurred is what is important. The average trader would never know that an order that large was in process until well after the fact.
The other event was that the RBNZ left New Zealand’s interest rates at historically low levels. At the time of the announcement, NZD/USD rose by 100 pips in less than 5 minutes. It wasn’t the fact that the RBNZ left rates low it was that the market expected a more dovish tone from the statements with possibly a rate cut. The statement that was made indicated that the bank is on track with expected rate hikes over the next few years. NZD/USD recovered about half of what it had lost so far this month.
The ongoing Brexit issues have persisted with the UK Prime Minister suffering defeat after defeat at home. This situation has weighed on the GBP for months and it continues to do so. GBP was flat against the EUR and the JPY but lost to a stronger USD.
About Bill Poulos:
In 1974, Bill Poulos began analyzing the stock markets as a hobby. At the same time, he had a busy full-time career at General Motors while raising three boys with his wife. Bill made many mistakes while making trades but learned valuable lessons. Upon retiring from GM in 2001, Poulos and his son, Gregory, co-founded Profits Run, Inc. The company creates materials to assist investors in making better investments. Bill stays abreast of current economic and political trends that have an impact on the markets. He was quoted in a Forbes article titled, How Gig Workers Can Fund Their Passion Projects. He lives in Wixom, Michigan with his high school sweetheart, Karen.