The Australian dollar has really weakened this week as investors struggle to make sense of the uncertainty present in their current political situation. The current Prime Minister is now Scott Morrison, after the ousting of Malcolm Turnbull. Interestingly, the Australian has risen today as the news has settled the immediate uncertainty of a leadership contest.
The Australian dollar had been rising on the improved economic outlook for Australia, investors were backing the RBA, Reserve Bank of Australia to raise interest rates in the future but it really is likely to be longer term. In particular this uncertainty over the economic outlook could prove very damaging for interest rates as investors shy away from making any key decisions with the uncertainty present.
The big question now is whether Mr Morrison can hang on to the position or will he have to call an election to justify his position? Any signs of an election or the actual announcement of an election down under would see the Australian dollar much weaker, clients looking to buy or sell Australian dollars could find themselves in a volatile market if this happens.
The Australian dollar has also risen today on the expectations that there has been progress with Chinese trade talks which might have previously seen the Australian dollar weaker. Whilst the trade wars are bad news, the expectation that they will not massively deteriorate and see huge damage to the Australian economy might help the Australian dollar.
Finally, events concerning Donald Trump should also be a market mover on the Australian dollar, you never quite know what Donald Trump will do or say which can move rates! Lately, the weaker US dollar we have seen has helped the Australian dollar to rise. Further woes and concerns surrounding Donald Trump and his government could lead to a stronger Australian dollar.
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