Market Update – 19th September 2018 – Markets Rebound After Trade Tariffs In Classic Sell The Rumour

Yesterday I noted that when Donald Trump eventually drops tariffs on US$200 billion of Chinese exports it could be a “sell the rumour, BUY the news” type event. And that appears to be precisely what has happened overnight with equities, commodities and the AUD all rallying on robust market sentiment following the CONFIRMATION of new trade tariffs on China.

But what exactly does “sell the rumour, BUY the news” mean?

Basically it means markets hate risk and tend to sell off on any whif of bad news (the rumour); quite often that selling is overly zealous and overdone. In this case rumours of Trump’s trade tariffs on Chinese exports over the past six months has seen commodities, equities and the AUD sell off quite substantially as a result of fears about global growth being impacted by these tariffs. That heavy selling over the past 6 months created opportunities which has seen savvy investors BUY undervalued assets when that bad news was eventually delivered yesterday. However we’re certainly not yet out of the woods. 

Nonetheless the strong rebound in commodities prices overnight has seen commodities currencies like the Aussie dollar and Canadian dollar to move higher overnight. AUD/USD is looking like moving well into the 0.72’s today, while AUD/EUR is back in mid 0.61’s. 

Monetary policy minutes released from the RBA yesterday suggest the next move in interest rates will be up rather than down as growth starts to pick up once again, which was highlight by strong GDP figures in the latest quarter. This more hawkish tone from the RBA is also bullish for the AUD and probably suggests we may have seen the worst of the AUD’s declines. 

AUD EXCHANGE RATES:

AUD/USD – 0.7199

AUD/GBP – 0.5459

AUD/EUR – 0.6158

AUD/NZD – 1.0930

AUD/JPY – 81.041

USD/BTC – $6,323

OTHER MARKETS: 

All Ords (XAO) – 6,269

Gold – A$1,658/oz

Silver –  A$19.60/oz

WTI – US$69.49/barrel

DATA RELEASES TODAY:

GBP – CPI at 6.30pm