After weeks of what one can only describe as a ‘rough trot’, the Aussie Dollar has finally seen a few days of price appreciation against most major currencies. This appreciation is brilliant news if you are planning a holiday soon and need to purchase your foreign currency. As it stands, one AUD will buy you:0.6677 US dollars
70.4223 Japanese yen
0.5342 Great British pound
1.0314 New Zealand dollars
0.8931 Singapore dollars
Influences on the AUD
US/ China Trade War
On Monday US Treasury Secretary Steven Mnuchin said the US and China have made “lots of progress” on trade talks. While this sounds promising, the actual meaning of the statement is unknown. All I know is that when my mum asked me how my university assignments were going, and I said I had made “lots of progress”, all I had done was write my name on the document and tidy up my desk. If the past is anything to go by, take any news about the US / China trade war with a grain of salt.
Either way, the news was music to the market's ears and, when combined with the US’ better than expected credit data for July, allowed for an improvement in risk sentiment. These, in turn, allowed for a boost in the AUD. The Aussie Dollar is considered to be a risky investment and thrives when risk sentiment is high, or there is a ‘risk-on’ attitude in markets. This improvement in risk sentiment was also supported by decreased concerns of the U.S economic slowdown and a rise in metal and oil prices.
On Monday night UK time, British Parliament voted against Prime Ministers second bid in seven days for a general election. With that vote done and dusted, Parliament now falls into five weeks of suspension.
Johnson requested this suspension, and it was approved by the Queen two weeks ago. Despite the Prime Minister claiming no-malicious intent, many argue that this suspension is an attempt to stop MPs from discussing Brexit and preventing the UK from leaving the European Union without a deal on October 31.
MPs are so convinced that this is the case (and a considerable roadblock to democracy) that they have successfully voted in favour of an order that requires Johnson to release private internal communications with his advisors regarding his plan to suspend parliament for five weeks.
Further to this, last week MPs passed a law urging Johnson to seek a three-month extension to the current Brexit deadline of October 31 should he not secure a new deal with the EU. It is unknown if Johnson will indeed comply with this, especially after he stated he would rather “die in a ditch” than seek an extension. Moreover, his office has come across very unwilling to share their private correspondence regarding the suspension.
It all seems a bit fishy to me (and not the good kind of fish that comes with chips either). Either way, don’t expect it to be quiet on the Brexit front just because of the Parliamentary suspension. Individual parties will still hold conferences on Brexit and their applicable policies.
Last week’s successful vote in favour of another Brexit delay boosted the value of the pound as markets were less concerned about the prospect of a no-deal. Since then the AUD has recovered some ground against the GBP.
The Australian dollar has also lifted to a six-week high against the euro. This was driven by the improved market sentiment, as well as better than expected German export data for July.
Back on Aussie shores, home loans experienced their biggest monthly gain in almost four years, increasing by 5.1% on last month. This result was ten times greater than the market expectations.
This boost comes after a rise in property prices last month, and the Reserve Bank of Australia’s (RBA) decision to cut official interest rates in both June and July. Currently, the RBA cash rate sits at 1.0%, with more cuts expected by the end of the year.
Further to this, the Aussie dollar's uplift over the last few days was also driven by the improvement in Australia’s account deficit and the stronger than expected housing finance data for July that was released yesterday.
While this is good news for the Aussie dollar, and an increase in home loans is positive, Australian’s continue to take on more debt which can, ultimately, hurt the economy. The RBA will need to consider all of this and more when they meet again next month.
Until then, it is worth taking advantage of the positive gains we have seen in the Aussie dollar. Don’t forget to add Rate Move Guarantee to your purchase in-store as well, it’s free, and if the rate improves within 14 days we will refund you the difference!*
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