5th December 2018
The AUD weakened slightly overnight against the USD, hovering around 0.7136 today.
A risk averse mood prevailed, as markets continue to question what is happening between Chinese President Xi Jinping and US President Trump in regards to their ongoing trade wars.
US/ China Trade War
Over the weekend, the two respective leaders had a meeting as part of the G20 summit and agreed upon a 90 day ‘ceasefire’ to help prevent the trade war escalating.
The thing is though, Chinese officials have failed to confirm exactly what was agreed upon. This is cause for concern in currency markets, especially considering Trump has said that if no deal is possible, “I am a tariff man”.
Markets as a whole do not expect the Chinese government will make any changes to its ‘Made in China 2025’ industrial plan, a key cause of the trade war. Should they not make any changes, it is very unlikely that Xi and Trump will bridge their differences in the 90 days. No deal means it is highly likely the US will increase the tariff rate on US$20 billion worth of imports from China from 10% to 25%.
This is not ideal for the Aussie dollar, due to our economy’s strong ties to China’s economy and the CNY.
Paris, and wider France, is currently witnessing mass spread riots in response to recent tax hikes and economic hurdles. The riots began on November 17 when motorists voiced concern over increased fuel taxes.
It seems the fuel taxes were the straw that broke the camel’s back, as concerns about
the stagnant economy, social injustice and the French tax system have all been voiced as the riot continues. Despite the French Government announcing a delay in the fuel tax, the riots continue, with protestors saying it is too little, too late.
There has not been a major impact on the Euro yet, however the market is expecting some volatility as investors begin to see the outcomes of the riots on the French economy.
The AUD continues to strengthen against the GBP in the lead up to British MPs voting on Brexit on 11 December.
Overnight we saw the GBP fluctuate after the European Court of Justice determined that the UK can withdraw its notification to leave the EU (Article 50) without seeking permission of the other remaining EU member states. This put upward pressure on the GBP for a short time. However, this was short lived after a vote found the government in contempt of Parliament for withholding full cabinet legal advice on the Brexit deal.
Whilst this is not great news for the UK, it’s good for Aussie travellers exchanging AUD for GBP.
The market is monitoring a number of events at the moment that could potentially impact the Aussie dollar. Our advice to travellers is to keep an eye on the news, learn what impacts currency fluctuations and look to purchase when the rate is high.
If you are heading overseas soon we also recommend adding Rate Guard to your currency purchase in store at Travel Money Oz. It’s free, and if the rate improves within 14 days of purchase we guarantee to refund you the difference*.
Definitions for those of us playing at home:
Risk Sentiment (Risk-averse mood)
This refers to changes in investment activity based on the level of risk tolerance in the market. If the risk is perceived to be low (risk-on) the theory states that investors are more willing to engage in higher-risk investments. Likewise, when the risk is perceived to be high (risk-off), investors will seek lower-risk investments.
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 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 5 December 2018.
*Terms and conditions apply to Rate Guard. See https://www.travelmoneyoz.com/rate-guard for more information.