The Organisation of the Petroleum Exporting Countries (OPEC) meet today which could create some volatility for the commodity currencies which includes the Australian dollar. There has been a big push in recent months by the member states to try and cut production to artificially push the price of oil higher although this has been fraught and has taken many years to get to this point. As a commodity currency the Australian Dollar is impacted by the price of oil as well as other commodities.
Any rise in the price of oil is generally good for these currencies and climbs this week have already helped boost the Australian Dollar. The price of oil has been rising ahead of this meeting in Vienna in anticipation that a deal will be hammered out to cut output. It all hangs on whether Iran and Iraq are prepared to cut their production and stick to it. The press conference will be held at 4pm and new direction for both global and currency markets should follow.
Although the Australian Dollar has been looking stronger of late things may be about to change as we approach the US Federal Reserve Meeting in December. There is a strong chance the US Fed will hike interest rates marking a one year anniversary from the last 0.25% hike. This is likely to see global flows return to the US dollar where interest rates will be higher and moved away from the riskier Australian dollar. This is likely to see the Australian Dollar weaken.
The next question will be how many times the Fed will look to hike in 2017. Under President-elect Donald Trump there will be some ambiguity over this but considering there may only be one hike out of four this year which actually materialises then the likelihood in my view is that the Fed will aim high for 2017 especially considering the recent overall pick up in the US economy.
For more information on how a US interest rate hike in December could impact your Australian Dollar buying or selling requirement, feel free to email me at email@example.com.
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