9th October 2018
The start of October has not been overly optimistic for our little Aussie battler dollar. In comparison to most of the major currencies, the AUD has only been able to make gains against the New Zealand dollar.
Overnight the AUD fell to a two year low of 0.7041, however, it rebounded back slightly to 0.7060 against the USD.
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As US interest rates rise off the back of strengthening US economic data while Aussie interest rates remain the same, the AUD is less attractive for international investors seeking higher returns on their investments.
This strong run of economic data, as well as statements made from various Fed members has resulted in the market reevaluating the prospect of higher interest rates in the US.
The other major theme being tracked by markets is continuing tension between the US and China over trade tariffs. With US midterm elections looming on November 6 2018, US Vice President Mike Pence stated, “China is meddling in America’s democracy”, further accusing them of a “comprehensive and coordinated campaign” to undermine support for Donald Trump.
Elsewhere around the globe, the AUD has not seen any major movement against the Euro since the start of October.
There is mild concern surrounding Italy’s 2019 budget proposal, as they are the third biggest economy in the Eurozone. Specifically, the European Commission has growing concerns that Italy’s finance plans will breach European rules on government borrowing.
The Euro itself is at a seven week low against the USD, with Italy’s share market nearing an 18 month low.
Back at home, whilst the weaker AUD is great for Aussie tourism as international tourists now see Australia as a more affordable destination, it is not so great for us Aussies planning to head overseas.
If you are heading overseas soon, particularly to the States, we recommend keeping a close eye on currency movements and capitalising on any rises the AUD has against the USD. When purchasing, we always recommend you add Rate Guard to your transaction. That way, if the rate improves within 14 days of your purchase we can refund you the difference and give you a bit more spending money in your back pocket.
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