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AUD News: AUD holds strong as the US government reopens and British MPs face another vote.

29th January 2019
As the dust settles on the long weekend and Aussies look towards a four day week (yay), the AUD is performing relatively well against major currencies compared to the last few days. 
As it stands, one Aussie dollar can buy you:
 
0.6969 US dollars
0.6012 euros
 
If you were exchanging $2000 AUD today compared to Saturday the 26th January (or three days ago) you’d be sitting pretty with an extra $11.80 USD, 780 JPY, 5.80 GBP or 5.40 CAD. Sure, it might not sound like much but a few days’ difference in exchange rates can mean an extra snack or two on holiday. 
 
Avoid missing out on your extra snack by adding Rate Guard to your transaction in store. It’s free, and if the rate changes within 14 days of purchase we will give you the difference*. 
 

What’s the what in currency markets this week. 

Aussie PM begins his magic school election bus tour of South East Queensland. 

Five months into his role, current Australian Prime Minister (and I say current for very good reason because Aussies’ trade prime ministers like Pokemon cards)  Scott Morrison will deliver a speech today pledging the creation of 1.25 million jobs over the next five years. Over the weekend, I heard Cinnabon is coming to Australia, so I’m hoping a fair few of these jobs go towards the creation of sweet, sweet cinnamon scroll goodness. 
 
In addition to these jobs, PM Morrison (or as his limited edition Aussie PM trading card says, ScoMo) will also promise to eradicate net debt within a decade. In other words, Australia is going to pay off more than $350 billion over the next 10 years. Crikey that’s a big one. 
 
Morrison’s speech will attempt to begin framing the election and the Liberal campaign as a choice between a strong economy and a weak economy. The Australian federal election is due to be held in May this year, so strap yourselves in for a a few more months of politicians making promises, kissing babies and riding around in overtly branded coaches. 
 
The market doesn’t expect this speech to have a huge impact on the value of the AUD. Rather, events in other countries will have the biggest effect on our currency this week. 
 

Europe is hyperventilating into a paper bag at the thought of a recession. 

Long story short, there is some rather dire economic data coming out of France (and wider Europe) that has economists clutching their pearls. 
 
This data shows a large decrease in French service sector confidence, as well as the worsening credit quality of European companies. Last week, the European Central Bank said that risks to the economy in Europe had “moved to the downside” as a result of a reduction in international trade. In other words, Europe is also seeing the effects of Brexit and the US/China trade war (similar to Australia, Europe has very close trade ties with China). 
 
To add salt to the wound, there is an industrial recession in Germany and a recession in debt-riddled Italy. Cue stress eating of Nonna’s carbonara. 
 
Despite all of this, analysts suggest that Europe will avoid a recession in 2019, however, economic growth will be weak as things are more fragile than Nonna’s fine china. 
 
If you are planning a trip to Europe soon, it’s definitely worth keeping an eye on the news and educating yourself on what affects the euro
 

The US Government is back open for business, baby. 

Last Friday, 25th of January, the historic 35-day partial government shutdown ended or was momentarily put on hold because the US government realised people needed to get paid. 
 
This shutdown was the longest in US history and saw over 800,000 federal employees forced to work without pay or get furloughed. 35 days without pay is a pretty rough stint for the best of us, let alone those who live paycheck to paycheck. So, as you can image, the shutdown left a pretty hefty dent in the economy due to the delayed economic activity (no wages = no people spending money). Economists believe around US$3billion was lost in GDP and won’t be recovered. 
 
As a result, when the US Federal Open Market Committee is expected to leave interest rates unchanged during their meeting on Wednesday this week. 
 
This is good news all round - American workers are getting paid again and a hold on US interest rates means less downward pressure on the Aussie dollar. 

 

Brexit is as confusing and uncertain as ever. 

The UK House of Commons will vote on a number of amendments to Prime Minister May’s defeated Brexit deal today (Wednesday morning Aussie time). 
 
Here is a quick summary of what’s on the table. 
 
Stop a no-deal by delaying Brexit
As it stands, the United Kingdom will leave the European Union on March 29, 2019 regardless of whether there is a ‘divorce deal’ in place. The prospect of leaving the EU without a deal has been widely touted by politicians to be rather tumultuous and not in the best interest of Britain and its economy. 
 
Should there be no approved exit deal by the end of February, Labour MP Yvette Cooper is hoping for an amendment that would delay the Brexit date. If this is passed, the amendment will be legally binding on May’s government. 
 
Saying no deal to a no deal all together
Further to Cooper’s amendment, conservative MP Caroline Spelman is calling on Theresa May to rule out a no-deal Brexit all together. 
 
This argument doesn’t have the same legally binding ramifications as Cooper’s, so it is more likely to gather the support of more MPs.
 
Power to the backbenchers
Normally the government controls the agenda in the House of Commons. This means backbenchers don’t get a chance to dictate parliamentary business or put bills on the table.
 
This amendment would allow MPs to raise different Brexit motions for six days of debate prior to March 29, giving them the chance to vote on alternatives to the current deal. 
 
A vote on a new deal or referendum
You guessed it; this means, parliament would have a vote on all possible Brexit options, including a second referendum. 
 
Getting a ‘Citizens’ Assembly’ to decide
The government would form an assembly of 250 members that comprise a representative sample of the population. This lucky group would then be asked to consider the Brexit process, provide recommendations and report back. 
 
Re-writing the Northern Ireland backstop 
MPs are seeking for PM May to either put a time limit on the current Northern Ireland backstop plans or replace the backstop entirely with alternative arrangements in an effort to avoid a hard border. 
 
The level of uncertainty surrounding Brexit continues to affect the value of the pound. It will be interesting to see what comes out of the upcoming meeting and how the result fluctuates the pound.
 
 
*There is no such thing as Australian Prime Minister Trading Cards. Bugger. 
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All rates are quoted from the Travel Money Oz website, and are valid as of 29 January 2019.
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