The AUD has edged higher against the EUR, GBP, CAD and SGD, held ground against the USD leading up to the Federal Reserve’s policy meeting today and lost ground slightly against the NZD and JPY in a strong few days of trading.
The AUD’S strength will be welcome news for Aussie travellers who will be hoping to see it move up further in the face of dropping interest rates in the US and a culmination of Brexit dramas in the UK.
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AUD holding tight as global pressures come home to roost
It’s an important week for most major currencies this week as a number of ongoing uncertainties come home for supper to be dealt with. In the UK, the Conservative Party is voting behind closed doors for Theresa May’s replacement, bringing months of uncertainty to an end and in the US, the World is watching whether the US Federal Reserve are going to listen to Trump’s threats regarding interest rates or play to their own tune.
On the Domestic front, a dearth of vitally important data from the release calendar makes those two international events the main drivers of AUD performance this week. Earlier we had less than impressive jobs data, showing just a 500 increase in jobs for June which will be likely to keep the pressure on our own RBA to keep interest rates moving downwards. The RBA has said time and again that a failure to get unemployment back under the magical 5% mark will likely result in more easing policies being utilised.
With local manufacturing results due tomorrow, the market will be keeping a close eye on Australian July manufacturing and service data to pair with Chinese data released a week later. This, along with US Federal Reserve rate cuts and the PM situation in the UK will shape the performance of the AUD in the short term.
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Conservative Party leadership ballot closes, Boris likely but issues just beginning
The time is now for the UK; within a few short hours we will know who the new leader of the Conservative Party and PM will be, ending months of speculation and merry-go-rounding that has been hurting the GBP against most major currencies. Boris Johnson still stands most likely to assume the post, sending shivers down the spine remainers across the country.
The Pound has been in borderline turmoil against most major currencies recently as the market grapples with exactly what a Boris Johnson led Brexit would look like and what could suffer in a no-deal situation. This week the GBP has slid backwards against the AUD, NZD, USD AND EUR and only some real clarity over their next moves will serve as an antidote for the poor showing of the GBP.
Want another rundown on what Brexit means for you? I don’t blame you. We've got the low down on what to expect from Brexit and how to get through unscathed.
Trump keeps pressure on the Federal Reserve, how low will rates go?
With the Federal Reserve moving into their blackout period preceding their policy decision markets are left to make an educated guess on which way interest rates will go when they meet tomorrow morning – will interest rates stay the same or drop .25 or even .50 basis points? If President Trump gets his way, rates will be coming down .50 basis points in an effort to catch up to other countries around the world who have been in an easing cycle for some time now.
With the US economy showing signs of weakness as per recent manufacturing results, GDP data, Trade War rhetoric, retail figures and employment results, the Fed looks poised to make the cut Trump wants to help stimulate the economy. The market had previously priced in one rate cut of up to .50 basis points, but it is appearing more likely that the first cut may be more conservative at .25 points first up.
Don’t expect too much movement in the AUD/USD stakes on the back of 1 .25 basis cut drop, but if the cut is still .50 points the AUD could see a slight boost against the USD in response.
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