The AUD has had a positive trading run since last week’s update on the back of some stronger than expected Chinese trade and economic data, finding some traction against most of the major currencies. It is nearly all green this morning for the Australian dollar, rising against the USD, JPY, EUR, GBP, NZD and SGD while dipping a few pips against a strengthening CAD.
This will be welcome news for Aussie travellers after a slow finish to last week for the AUD after making some gains against the major currencies. Today, 1 AUD will buy you:
Rate Guard – Add it when you purchase foreign cash in any of our 130+ stores. It’s free, and if the rate improves within 14 days, we will refund the difference. Perfect for peace of mind when buying your travel money.
AUD making gains across the board, but for how long?
Goldilocks hasn’t had any trouble from the AUD bears this week as the Aussie dollar climbed modestly against most major currencies, the USD toward the top of the gainer's list.
The performance of the AUD/USD came on the back of slightly stronger than expected Chinese manufacturing output data, sales data and an increase in GDP measures.
However, in news likely to keep RBA Governor, Philip Lowe up at night, the ANZ-Roy Morgan Australian Consumer Confidence index dropped again over the weekend in a worrying sign for the consumer economy. Confidence dropped 1.5% from last week, with people’s perception of the economy and the outlook for the next 12 months slipping 1% while sentiment about conditions over the next five years dipped 2.6%.
The RBA was hoping for the June and July interest rate cuts to stimulate consumer and business confidence, leading to increased spending in the economy and investment from Australian and International businesses. So far that doesn’t appear to be the case, with uncertainties outweighing any positive effects at this point. It’s definitely something the RBA will be watching very closely.
In the RBA minutes released today from July’s meeting where interest rates were lowered by 0.25 basis points, the RBA was clear on needing to see more employment and wage growth in order to hit inflation targets and that current easing policies are best placed to stimulate the economy by lowering the AUD exchange rate and the cost of borrowing to give some extra spending money to consumers and businesses.
So far the AUD has responded by rising against major currencies, throwing a bit of a spanner in the works and inflation hasn’t moved a muscle in recent times. This puts pressure on the RBA to continue with dropping interest rates in the short term or on the Government to take more steps to stimulate the economy.
Are more interest rate cuts likely? Many economists expect at least one more rate cut by the end of 2019, putting extra pressure on the AUD. Watch this space very closely.
In the meantime, make sure you stay on top of currency fluctuations with our Rate Alerts - choose your currency, elect your ideal rate and we will send you an alert when it hits that point.
Bears and Bulls – what do they mean?
It’s a common expression used in trading and economic environments, but what exactly do Bear and Bull mean?
Knowing whether the current market environment is Bullish or Bearish is very important to avoid trading or purchasing against the overall trend, and for Aussie travellers, it can be the difference between having to tighten the belt a bit overseas or having a bit more of a splurge.
The best way to learn how to identify bull and bear markets is through examples.
A bull market is when the buyers are optimistic about the rise in the prices of shares or currency. It is the time when the share prices or a currency is rising because of positivity in the macroeconomic environment and a range of other factors. Investors or traders who are optimistic and buy shares or currency at this time are known as Bulls. Just remember that when a bull is angry and attacks, it uses its horns in an upward goring manner, that’s why a bull market is one that is going up.
A bear market is the exact opposite of a bull market, characterised by falling prices and typically shrouded in pessimism by traders and currency purchasers. On the contrary, a bear market is named for the way a bear swipes downward during an attack, being a graphic metaphor for market activity under these conditions.
There you have it; Bull and Bear markets – violent and informative.
GBP continues to struggle, more losses likely
Ah Brexit, the gift that keeps on giving. While things have thankfully been a lot quieter recently than earlier this year, the schmozzle that is Brexit keeps throwing out curveballs.
At the latest Conservative leadership debate between Jeremy Hunt and Boris Johnson, both hopefuls said they weren’t willing to accept Theresa May’s negotiated Irish backstop provisions designed to prevent border drama upon Brexit on October 31st. With the EU previously saying those provisions were an essential part of a Brexit deal, both men appear to be on a collision course with European leaders. Throw in Boris Johnson’s inability to negotiate on other aspects of Brexit, and it spells more drama for the UK and the GBP.
On the EU side of things, Ursula von der Leyen, the designated successor to Jean-Claude Juncker as President of the European Commission said two things yesterday that will have the market on tenterhooks. Firstly, that the deal negotiated earlier this year with Theresa May "is the best and only possible deal for an orderly withdrawal", effectively ruling out a re-negotiation and secondly that "should more time be required, and should there be good reasons provided, I will support a further extension." Maybe October 31st isn’t the be all and end all for Brexit after all...
Just what the GBP and UK citizens need; more uncertainty.
It looks like things won’t be turning around any time soon for the GBP. A real lack of momentum is what the GBP seems to be struggling with at the moment; any positive or even remotely positive data is immediately flooded by more Brexit drama. This spells good news for the AUD and Aussie travellers off to the UK, with the GBP tipped to drop more before the year is out.
USD performs strongly, held in check by upcoming Federal Reserve decision
The performance of the USD has been mixed this week, rising against the GBP and EUR, but losing ground to a strong AUD. The release of stronger than expected US July Empire manufacturing data provided a boost to USD performance despite growing uncertainty around the monetary policy of the Federal Reserve moving forward.
As we get closer and closer to the Federal Reserve’s policy meeting on July 31st, speculation is heating up that the Fed will move towards dropping interest rates by at least .25 basis points to stimulate the economy and move monetary policy in line with other Central Banks around the world. This slight uncertainty has kept the USD in check despite some stronger data on the manufacturing front.
On the Trade War side of things, it’s been pretty quiet lately, with no real movement in the positive or negative.
Despite the AUD performing strongly on the back of Chinese economic data released, it wasn’t all rosy for China as GDP came in at 6.2%, the lowest rate in decades. This result wasn’t totally unexpected, with the Trade War squeezing Chinese manufacturers, as well as US firms based in China.
The Chinese Central Bank has already delivered a stimulus package this year to offset some of the pain, and an interest rate cut of their own is looking more likely.
Basically, things are still really up in the air. For each set of positive or at least neutral economic data, a set of negative data balances it out.
Until the US Federal Reserve makes its position clearer and the Trade War comes to a conclusion, that’s not likely to change any time soon. So get used to volatile trading and a USD that yo-yos against the AUD, GBP and other currencies and make sure to do your best to keep up to date with the rate of the day in order to get the most bang for your buck.
While you’re at it, sign up for our Travel Money Club to keep up to date with the latest happenings. Did I mention that everyone that joins goes into the running to win $500* every month?
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 the 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 16 July 2019.*Terms and conditions apply to Rate Guard and the Travel Money Club.