Another day, another dollar. This week has gotten off to a slow start with US and Canadian markets closed on Monday to celebrate Labour Day. Have no fear though; we still have plenty to report on because British Prime Minister, Boris Johnson, has made it evident that he is full steam ahead for both Brexit and the UK government shutdown. Today, one Aussie dollar will buy you the following:
Despite everyone being fed up with the Brexit shenanigans, the increasing uncertainty about the UK’s future has put downward pressure on the value of the pound. This decrease in value is excellent news for Aussie travellers who can score an extra 8.60GBP if they exchanged $2000AUD today compared to last Friday. 8.60pounds might not sound like much, but it’s an extra pint or two at the pub which you’ll probably need after listening to the poms complain about Brexit.
In case you’ve been living under a rock for the past few weeks, here a quick Brexit update.
- The deadline of October 31 is fast approaching, and there is still no deal in place which makes a ‘no-deal’ more likely
- UK parliament has been on summer recess and resumes today
- Boris Johnson asked the Queen for permission to suspend Parliament for five weeks starting next week. This request was approved and was met with widespread protest as many argue it is a way for Johnson to push through a ‘no-deal’ without giving MPs enough time to debate.
As Parliament resumes this week those against a no-deal Brexit are scrambling to bring a motion to Parliament. They hope to force another Brexit delay until January 31 if a deal cannot be reached with the European Union by October 19. This comes despite Johnson saying that “there are no circumstances in which he will ask Brussels to delay.” I don’t know what that means if the motion gets approved by Parliament, but I have no doubt we will find out in the next few days.
Adding further fuel to the fire, markets expect that Johnson will call a general election on October 14 if he loses his ‘deal or no deal’ strategy. On the weekend he said that he didn’t want an election; however, markets believe he would rather an election than allowing MPs to delay Brexit further.
For such an election to occur, ⅔ of lawmakers need to agree. If the numbers don’t work in Johnson’s favour, he could call a vote of no confidence against himself to force an election - an unprecedented move in UK parliament.
None of this is confirmed yet, and the ongoing uncertainty around Brexit can work in the AUD’s favour against the pound. If you’re planning on purchasing GBP, be sure to add the Rate Move Guarantee to your purchase in-store. It’s free, and if the rate improves within 14 days of purchase we will refund you the difference.*
Other global news
Brexit aside, there hasn’t been a great deal happening in markets yet due to the Labour Day holiday in the US.
It is worth noting, however, that the Trump administration went ahead with the plans to slap more tariffs on $110 billion worth of Chinese imports. This move came despite Chinese officials asking the US to revoke the tariff increase. Unsurprisingly, China retaliated by proceeding with plans to increase tariffs on $75 billion worth of US goods. It seems to be a never-ending game of tit for tat.
The increase in tariffs, coupled with the effects of Hurricane Dorian in the Bahamas, has lead to a fall in oil prices on Monday.
Unfortunately, Australia didn’t have a public holiday and business continued as usual. Without any significant developments in key themes, like the US/China trade war, the general outlook for the Aussie dollar is relatively unchanged. In other words, the AUD is still negatively impacted by the trade war and growing concerns of a slowing global economy.
The Reserve Bank of Australia will take this, as well as recent domestic data, into account during their monthly meeting today. Markets expect the RBA will keep interest rates on hold and are instead focusing on the language of the accompanying statement. The tone of the statement will provide insight rate moves for the rest of this year. Rates were already cut in June and July and are expected to be cut twice more by Christmas.
Finally, today also saw the release of the Q2 balance of payments. The June quarter recorded a $5.9billion surplus, quadruple the market expectation of $1.5billion. This result was boosted by booming commodity prices throughout the quarter and is a nice leg up for the Australian dollar.
It's not all positive news though as retail sales fell 0.1% in July. This figure is below market expectations of 0.2% growth. A 0.6% fall in spending at cafes, restaurants and takeaway was the key driver behind the decline. Perhaps millennials have given up on avo toast after all?
The disappointing figure leads one to believe that the government income tax rebates and interest rate cuts have yet to push Aussie's to spend at the shops. Perhaps they have just splurged on a well needed holiday instead? If that's the case, be sure to visit your nearest Travel Money Oz to stock up on foreign currency before you leave.
This blog is provided for information only and does not take into consideration your objectives, financial situation or needs. You should consider whether the information and suggestions contained in any blog entry are appropriate for you, having regard to your own objectives, financial situation and needs. While we take reasonable care in providing the blog, we give no warranties or representations that it is complete or accurate, or is appropriate for you. We are not liable for any loss caused, whether due to negligence or otherwise, arising from the use of, or reliance on, the information and/or suggestions contained in this blog. All rates are quoted from the Travel Money Oz website and are valid as of September 3 2019. Terms and conditions apply to Rate Move Guarantee.