News in the US dollar report section of this site has suggested that we may be closing in on a resolution to the US-China trade war. Although there is still clearly work to do for both sides to be happy, it is important to prepare should you have a currency exchange involving the Australian dollar, as any news regarding the trade war may impact the value of this currency.
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The trade wars impact the Australian dollar due to the number of imports China has from Australia and the close ties the two economies have together. Couple this with the Australian dollar being perceived as a ‘riskier’ currency, negative news on Trade wars has generally led to weakness for the Australian dollar historically.
With this in mind, should the talks fall through again the Australian dollar could potentially become cheaper to buy. On the opposite side, if they reach an agreement then it may lead to Australian dollar strength, making it more expensive to buy.
Overnight on Monday we have the release of the RBA (Reserve bank of Australia interest rate decision, accompanied by the monetary policy statement.
Expectations from analysts are to see a cut in interest rates, but because this is widely expected this may not have a huge impact on the value of the Australian dollar. What will be most important is the monetary policy statement that comes with the rate decision and analysts will have an eagle eye on any hints to plans of future rate cuts.
Westpac expect two rate cuts this year, one in July (next week) and one in November, J P Morgan expect 3 rate cuts into 2020 and Standard Chartered expects 3 cuts in 2019 alone.
For those that do not follow the markets closely an interest rate cut is generally seen as negative for a currency and a hike in rates as a positive. The reason for this is that a higher interest rate will make a currency more attractive to investors.
With the markets moving on speculation as well as fact, a hint to further cuts this year may weaken the Australian dollar and make it cheaper to buy.
This really is a hard currency to predict at present, economic indications suggest Australian dollar weakness but the latest on the political front suggests we could see Australian dollar strength.
If you have Australian dollars to buy or sell, yet do not have time to watch the markets all day every day then it may be prudent to register with us and let us do that for you. Feel free to contact us today on 01494 725353 and we will run you through the quick and simple process of having an account set up which will also give you access to rate alerts and many other handy market tools.
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