FED Hike effects AUD
Before the recent US rate hike by the Federal Reserve the Australian Dollar had weakened against the majority of major currencies in anticipation of the hike. The market moves on rumour as well as fact, which is why the damage had been done. The Australian is appealing to investors due to it’s high returns and relative safety. But, now following the recent US rate hike to 1.5% the US interest rate and the Australian interest rate are on par. The last time this occurred was between 1997 and 2001. The US Dollar is considered a safe haven currency and due to it now offering the same returns as the Aussie investors have been leaving the Australian Dollar in their droves.
The Australian Dollar has actually strengthened following the decision. This was due to the FED press conference where future monetary policy is discussed. It was stated there would be up to three further hikes next year, but the word “gradual” was used in regards to when they would be implemented. This was unexpected as many predicted a more bullish, optimistic tone.
When rumour starts to filter through that these hikes are going to occur this could well cause Australian Dollar weakness. If you are an Australian Dollar seller, be wary.
Strong employment Data boosts AUD
Another factor in Aussie strength was strong employment data, The Australian Bureau of Statistics saw employment move higher to 61’600. The highest levels since October 2015. There is still not enough positive data to warrant a rate hike down under.
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