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AUD News: AUD treads water as Federal Reserve meeting grows nearer

30th July 2019

The AUD has taken another hit against the USD this week as the market wraps its head around which way the Federal Reserve will go at their upcoming policy meeting. The Aussie dollar also lost ground against the JPY, EUR, CAD, NZD and SGD, but in good news for Aussies heading to the UK, the ongoing Brexit drama in Britain has given the AUD a nice boost against the GBP.

There’s plenty going on around the world at the moment, but the star of the show and most important driver of foreign exchange markets and consumer sentiment this week will be the much anticipated Federal Reserve meeting later this week.

Today, 1 AUD will buy you:

0.6714 US dollars
71.8199 Japanese yen
0.5939 euros
0.5429 Great British pound
0.8544 Canadian dollars
1.0049  New Zealand dollars
0.8916 Singapore dollars


AUD on edge as global currency catalysts line up for business

Despite trying admirably for a rally against the USD on Monday, the AUD has struggled for positive momentum against the Greenback, slipping back a few pips today. Despite the prospect of European Central Bank and Fed rate cuts taking some of the pressure off the AUD in the short term, the upcoming RBA meeting on 6th Aug and the following Statement on Monetary Policy on 9th Aug, combined with some cracks showing in iron ore markets appear to be keeping the AUD’s feet planted firmly on the ground for now.

Recent economic forecasts of inflation and unemployment also show the RBA are going to have a hell of a fight on their hands to bring levels into the Goldilocks zone, leading many to believe the rate cuts will keep on coming this year.

The AUD/USD especially remains under pressure although the AUD has some scope to recover some losses this week if we can produce higher than expected Q2 Australian inflation data tomorrow. Signs the consumer market is improving and growth is heading back in the right direction may be enough to claw some ground back.

As usual, the AUD is particularly sensitive to US/China trading and Chinese economic output and positive moves in that sphere might also give the Aussie dollar a much needed boost.

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Pound plunges to multi-year lows as fears of no-deal Brexit keep GBP on ice

The hits to the GBP just keep on coming as the market tries to make sense of the rapidly unfolding Brexit scenarios. The GBP lost ground against most currencies, particularly the USD, where it hit a 26 month low in trading this morning.

The AUD is also looking stronger against the Pound as newly installed PM Boris Johnson said he would not commence talks with EU leaders until they agree to reopen the deal struck with former PM Theresa May; a move EU officials have made clear will not be happening. One of the major bugbears of the deal is the Irish border conundrum and the backstop guarantee that Boris wants scrapped.

Senior UK officials have lamented that ministers were appearing to turbo-charge no-deal preparations in signs that the UK is preparing to jump from that cliff come what may. This uncertainty is kryptonite for currencies with markets preferring stability to the chaos that’s plagued UK politics for a number of years now.

In the only positive for the GBP, the Bank of England isn’t tipped to alter their monetary policy and drop interest rates just yet, keeping them as one of the few Central Banks worldwide not taking that course yet. If you’ve got some GBP stashed away from your last trip, it may be a good time to sell it back to AUD and take some profit before the widely tipped further drops in the pound speed up.

USD strengthens as Federal Reserve tipped to play rate cuts conservatively

The US dollar has bounced on reduced market expectations of a more aggressive 50 basis point interest rate cut when the Federal Reserve meet next week, with the market pricing in an almost certainty of a .25% cut instead. As usual in such a topsy turvy economic environment, take each forecast with a bit of scepticism though as things can change rapidly.

Any drop in US interest rates will be welcomed by the AUD as the Federal Reserve moves into the same cutting cycle as many Central Banks around the world and winds back some of the policies that resulted in the USD strengthening over the last 12 months.
Further bolstering the prospect of a lower than expected rate cut is data suggesting consumer spending and household consumption may be on an upwards trajectory. Figures released yesterday show US GDP increased by a 2.1% annualised pace in Q2, exceeding market estimates of only 1.8%. Consumer and government spending was particularly strong, with household consumption growing by 4.3%, the best result since late 2017, while government spending grew 5%, its fastest pace since 2009.

It wasn’t all fireworks and bubbly for the US though, with some gains being offset by declines in business investment – a side effect of global growth weakness and ongoing trade uncertainties with China.

Speaking of China, talks with the US regarding trade are scheduled to re-commence in Shanghai this week and the world will no doubt be watching closely for signs the two heavyweights can put aside some differences for the betterment of world trade stability. Good luck picking which way things will go, scoping out Trump’s Twitter feed may be the best way to keep on top of how well (or not well) talks with the Chinese go.

In short, the markets main focus this week is on US/China trade talks neck and neck with the Federal Reserve meeting on Wednesday. Everything else is just a sideshow at the moment. The USD has held firm so far, but that run may be nearing its end.

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