Keep an eye on Fed rate forecast as this will have bearing on AUD
The Reserve Bank of Australia (RBA) have stated it is unlikely there will be a rate hike in 2018, this could be worrying news for those holding AUD.
Investors often place their funds in the Australian Dollar due to high returns due to the current interest rate being sat at 1.5%. The problem at present is that the US are also offering similar returns with the interest rate at 1.5%. The US dollar is considered a safe haven currency and the Federal Reserve representatives have said there could be as many as three further rate hikes this year.
This means the US Dollar is a far more attractive prospect and as those in possession of Australian Dollars leave to the US Dollar you vcan expect Australian Dollar value to fall.
Personally, I would be surprised to see as many as two rate hikes from the FED if you consider recent history despite the recent change in Fed chair from Janet Yellen to Jerome Powell.
It is being swept under the carpet that a rapid rate in hikes has the potential to cause serious problems in the US economy.
The most serious effect of a steep rise in rates would be the increase in pressure on US tax payers to repay current debt.
Quantitative Easing has been one of the major contributors to US debt increasing to nearly USD 21 trillion from 12 trillion in 2010. No doubt it will not be addressed and played down. If it is made common public knowledge however this could be good news for the Australian Dollar.
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