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AUD News: Aussie dollar remains steady prior to Fed meeting tomorrow

18th December 2018
The Aussie dollar has stayed in a very tight trading range this week against the USD. Essentially, this means it has barely moved more than a cent, hovering around 0.6978. 
With only seven sleeps until Christmas, markets are relatively quiet. However, the US Federal Open Market Committee (FOMC) will meet tomorrow and markets are pricing the probability of an interest rate hike at 75%.
US President Trump had a crack at the FOMC by tweeting, "It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!"
This tweet, coupled with Trump’s previous comments about the Fed’s choice to increase rates, makes it clear that he is hoping to persuade them into not raising rates at their final meeting of the year tomorrow. The market doesn’t think Trump’s tweets will work, with many arguing it will only stoke the Fed’s fire as they look to show that they are independent. 
Markets are expecting a hike, and should it not occur, the USD could fall slightly.  This would be great news for Aussies looking to purchase some USD prior to heading over to the States for a Christmas break. With this in mind, if you do need to purchase USD in the next few days we recommend adding Rate Guard to your transaction in store. If the rate improves within 14 days of purchase we will refund you the difference*. 
With every interest rate hike, the Fed also releases minutes that markets look to for future interest rate predictions. It will be interesting to see if these minutes will hint at further hikes in 2019, similar to previous versions where they have referenced “further gradual increases”. 
Interest rate hikes can have a massive influence on the value of a currency relative to others. This year, the AUD has seen a number of fluctuations as a result of the US increasing their interest rates. Fluctuation occur as higher interest rates mean a greater return for investors. Hence, if the US increases their rates while Australia holds ours steady, investors may move their equity to the States seeking more profit. Less demand for the Aussie dollar puts downward pressure on its value. 
On a global scale, world equity markets (the stock market) have seen further falls this week which is contributing to a risk-off sentiment that is not super supportive of the Aussie dollar. Commodity markets are also a bit weaker which is, again, not very supportive of the Aussie dollar. 
Long story short, Brexit is still a bit of a shamozzle. Labour leader Jeremy Corbyn (opposition to current Prime Minister Theresa May) has threatened to call a parliamentary vote of no confidence as the new date for the meaningful vote isn’t until the new year. PM May has confirmed the vote will not take place until the week of the 14th of January. Mr Corbyn’s no-confidence motion was directed solely at PM May, rather than her party. A motion against the whole party could trigger an election. 
Regardless, with only 14 weeks left until the Brexit deadline, the UK needs to make a decision on their agreement soon. The lack of any real decision has resulted in the GBP trading in a relatively tight range, currently sitting at 0.5465 against the AUD. 
Heading overseas for the Christmas break? Don’t leave purchasing your travel money until the last minute! Order online or pick up in store today!
Definitions for those of us playing at home:
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.
Commodities are objects that come out of the Earth (gold, cattle, soybeans, coffee beans, oil etc). These are a major asset that is traded between countries. Australia relies very heavily on the trade of its commodities, being the world's highest exporter of Iron Ore.
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All rates are quoted from the Travel Money Oz website, and are valid as of 18 December 2018.
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