14th January 2019
The start of a new week means 5 days of market movements that can impact the value of the Aussie dollar for travellers. As markets open today, $100 AUD will buy you:
$70.12 US Dollars
¥7,478.73 Japanese Yen
£53.92 Great British Pounds
$89.91 Canadian dollars
Let’s take a look at what could influence markets, and the AUD, this week.
- The US government shutdown now the longest in US history, going into its 24th day with no end in sight.
- The next Federal Open Market Committee (FOMC) interest rate decision to be announced at end of January.
- The AUD is back up off recent lows against the USD and is above its 50 day moving average (see definition below) for the first time since December 13 2018.
The US stock market had a great week last week after some volatile times towards the end of 2018 and start of 2019. This general "risk-on" tone has been supportive of the Australian dollar and has seen it rise to 0.7012 today.
These gains in the stock market and AUD have happened despite the US government being shut down for the last 24 days. This is now the longest Government shutdown in US history and there appears to be no sign of either side backing down.
Last week’s soothing words to the market from the FOMC regarding the number, and pace, of any future US interest rate rises certainly did the trick with market pricing and rhetoric appearing to be more closely aligned. In other words, what the Fed is now apparently saying reflects what the markets are actually pricing in.
The next interest rate decision is due to be announced on 30th January. The expectation is that the Fed will keep interest rates on hold for a little while.This is good for the AUD, and should help hold its value against the USD.
British MPs will vote on Theresa May’s Brexit withdrawal agreement on Tuesday (Wednesday morning Australia time). May has said that a failure to deliver Brexit would be a “catastrophic and unforgivable breach of trust in our (UK) democracy.”
It is expected May will suffer a defeat on Tuesday, after which she will have three days to put forward an alternative. Should she lose, the UK could potentially face another referendum, a general election, an amended deal, or a complete no-deal for Brexit on March 29.
The UK’s core Consumer Price Index (CPI) for December is set for release on Wednesday. Markets predict it will remain steady at 1.8% compared to Dec 2017. Should the CPI remain steady, it will be a positive for the pound, potentially pushing it higher against the AUD.
The Retail Price index is due to be released on Wednesday, with markets predicting the figure will drop from 3.2% last year to 2.8%. Additionally, UK December retail sales figures will be released at the end of the week. The year on year forecast expects a drop from 3.6% to 3.3%.
All in all, there is a lot going on in the UK this week that will have an influence of the value of the pound against the AUD. The possible loss of Tuesday’s vote, coupled with expected poor retail sales figures and a lower retail price index could put downward pressure on the pound against the AUD, potentially giving Aussie travellers more when they exchange. Either way, it’s definitely worth keeping an eye on the news and taking advantage of great rates as they happen.
If you need to purchase your GBP sooner rather than later, don’t forget to add Rate Guard to your transaction in store. If the rate improves within 14 days of purchase Travel Money Oz will give you the difference*.
- Continued gains in the Chinese yuan are good news for the AUD
- China’s Vice Premier, Lie He, will visit Washington this month for further trade talks
- Chinese trade data for December will be released later today, with exports and imports expected to grow 3% and 5% respectively.
The intrinsic links between the Aussie and Chinese economies continue to play in our favour, particularly in regard to the value of the Aussie dollar.
Progress in the US/China trade war, coupled with positive estimates in Chinese trade data is a positive boost for the value of the AUD. There is little in the way of economic data out of Asia, especially with Japanese markets closed for a public holiday today. With this in mind, the CNY will continue to be highly influential on the AUD.
Definitions for those of us playing at home:
50-day moving average
This is, essentially, just the average of the last 50 days worth of exchange rates closing prices, or the value of the AUD when the market closes each day.
A moving average just means that each day the 51st day drops out of the calculation and is replaced by a new day.
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.
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All rates are quoted from the Travel Money Oz website, and are valid as of 14 January 2019.
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