The Australian dollar received a boost over night following an improvement in Australian unemployment. Unemployment fell by 0.1% in January from the month prior although the market reaction has been somewhat short lived. The Australian economy has remained incredibly resilient in recent months and has been further supported by stronger economic data from China earlier in the week. Chinese inflation climbed rapidly to 1% in January which was 0.7% above expectation
The Aussie is impacted not just by events in China but also the US. The Trump administration is still finding its feet having being dogged by Russian scandal and court cases over migration. It is only a matter of time before President Trump starts to introduce his major policies which are believed to include a huge infrastructure project domestically whilst foreign policy will also be one area to watch.
The path of US interest rates will also be a major factor for Australian dollar exchange rates. After Janet Yellen’s speech to congress this week it is widely expected that there will be an interest rate increase in March from 0.75 to 1%. This is important as there is likely to be a flow of funds back to the US dollar away from the commodity currencies to include the Australian dollar. As such there is a good chance the dollar could weaken from its recent highs.
Meanwhile for GBP AUD Brexit fast approached with a date for invoking Article 50 expected in March. Those clients looking to buy or sell Australian dollars would be wise to get in contact at the earliest opportunity in advance of the approaching political events. There is likely to be considerable volatility in these coming weeks which is likely to present some excellent opportunities for buyers and sellers alike.
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