Finally, after what seemed like an eternity, the foreign currency Gods have answered our prayers and given the AUD some reprieve. If the past few months have been anything to go by, it’s definitely worth making the most of this high by exchanging your AUD for foreign currency. Better yet, add Rate Movement Guarantee to your purchase in-store, and if the rate improves within 14 days we will refund you the difference!* So, how much are we talking? Currently, one Aussie dollar will buy you:
0.6628 US dollars
69.647 Japanese yen
0.5311 Great British pound
0.8478 Canadian dollars
1.0321 New Zealand dollars
0.8809 Singapore dollars
To put this into perspective, if you were exchanging $2000AUD today compared to three days ago, you would be getting an extra:
Why the boost?
A few things have contributed to the favourable conditions that are cushioning the Aussie dollar at the moment:
- News that trade talks between the US and China will resume in October
- Reduced tension in Hong Kong
- Positive Brexit developments
- Improved conditions between Italy and the European Council
- Lack of urgency from the RBA to lower interest rates
While all of these elements may not directly impact the AUD on their own, the culmination of them all have lead to improved market sentiment. In other words, markets are far more upbeat and confident about how things are tracking. As a result, they are more willing to trade or invest in risky currencies, one being the Australian dollar. We haven’t seen this ‘risk-on’ market attitude in a little while, and it is currently playing in the hands of Aussie tourists needing to exchange cash.
Resumption of Trade Talks
This week it was announced that China’s Vice Premier Lie He will visit Washington in October to resume trade talks. The positive news comes six days after both China and the US increased tariffs.
This positive news rippled through markets, and there was an increase in stocks as a result. Markets hope that China and the US will finally be able to reach a trade deal after over a year of yo-yoing negotiations and increased tariffs. Not only would this improve the broader global economic outlook, but it would be great news for the AUD due to our strong trade ties with China.
Reduced Hong Kong Tension
After around three months of protests, calls for the extradition bill to be withdrawn have finally been answered. While Hong Kong’s Chief Executive, Carrie Lam Cheng Yuet Ngor decided to meet the first of the protests demands, protests will continue as many say it is not sufficient.
While the continuing protests are a concern to global stability, this is a step in the right direction that was well received by markets.
Positive Brexit Developments
A whirlwind week in British politics has lifted market spirits. This time last week we spoke of Prime Minister Johnson getting approval to suspend parliament for five weeks just before Brexit. This suspension made the prospect of a ‘no-deal’ far more likely.
In the space of a week, MP’s have voted successfully on a bill that would require Johnson to delay Brexit until January 31 if he can’t secure a deal by October 19. We expect this bill will become law on Monday, September 7, just before the suspension of parliament.
Not only that, but MPs rubbed salt in the wound by failing to provide the necessary support for an early general election. Johnson put forward a vote that required two-thirds of the house of commons to vote in favour. Despite this initial decline, opposition leader Jeremy Corbyn has indicated that he may be more inclined to vote for an early election if the Brexit delay becomes law. MP’s are expected to vote again on the election next week, so we will sit tight and see how it all plays out.
The reduced likelihood of no-deal Brexit put upward pressure on the value of the GBP against the AUD. While this isn’t ideal if you need pounds, it’s certainly not all bad news as the developments helped lift global market sentiment.
Improved conditions between Italy and the European Council
This week Italy’s new pro-European Coalition government was sworn in. Led by Prime Minister Giuseppe Conte, the coalition comprises of the populist Five Star Movement and the centre-Left Democratic Party.
This is welcomed news, as Italy has been struggling through a month-long political crisis. Why is this good for the Global economy and the AUD? Well, Italy is the third-largest economy in the eurozone, so a political or economic crisis can have a far-reaching impact. I vote we all have a bolognese and gelato to celebrate! Yeah?
On Tuesday the Reserve Bank of Australia kept interest rates on hold. Despite a recent slowdown in Australian economic growth, RBA governor Philip Lowe mentioned signs of a “turnaround in established housing markets, especially in Sydney and Melbourne”. Despite rates staying on hold this month, markets still expect two cuts before the end of the year.
Australia has also posted a trade surplus of $7.268billion in July, led by a 1.0% increase in exports and a 3.0% rise in imports. I’ll cheers my 5pm Friday beverage to that.
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