25 September 2019
The AUD weakened against the USD overnight, from 0.7280 to 0.7255, as a result of movements in the US stock exchange.
A key driver behind this is the current trade issues between the US and China. They ramped up the official start of new 10% tariffs on US$200billion of Chinese produced goods across thousands of products. Not one to be left in the dust, China followed suit by imposing new taxes of 5% to 10% on US$60million of US goods.
None of this is positive for the Australian dollar; however the movements have been largely priced in by markets now. In other words, a lot of this was forecast so our banks were able to react and prepare accordingly last week.
The AUD is also being supported by higher commodity prices, with the commodity index reaching two month highs off the back of an increase in the oil price overnight.
The FOMC (read: big wigs of banks in the USA) are meeting on Thursday morning Australian time and are expected to increase US interest rates by 0.25%. Once again, this has been forecast so the change has been priced in by Aussie banks. If the 0.25% doesn’t happen, the AUD might spike, but the market wouldn’t bet on it as there is a fair bit of certainty around the expected rise.
Despite these factors, it’s a pretty quiet news week, so the AUD is expected to trade in a relatively tight range.
As a traveller, it is definitely worthwhile keeping an eye on the trade chats taking place between the USA and China. If they do come to an agreement (it’s unlikely, but stranger things have happened) the AUD could see a spike which means more travel money in your back pocket.
If you are travelling soon and are worried about fluctuating exchange rates affecting your spending money, rest assured as you can purchase your currency and add Rate Guard
to your transaction in store. That way, if the exchange rate improves within 14 days of purchase Travel Money Oz will refund you the difference.
P.S. Here are some definitions for those of us too busy planning our holiday to know what is going on.
Commodity index: A way investors can track the price and investment return performance on a basket of commodities.
FOMC: Not to be confused with FOMO, the FOMC is the Federal Open Market Committee. A 12 person body that focuses on monetary policy in the States.
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