The expectation is the for the Australian dollar to continue to face headwinds as the market tries to assess its attractiveness over the longer term. With Australia struggling whilst some other assets become more attractive, the pressure is on for the antipodean currency. Having lost value in recent weeks as market expectations deteriorate, what can we expect in the short term?
To answer some of the questions over the Australian dollar’s recent performance look no further than the United States. A key factor in this has been two fold from the US with raising interest rates and the Trade Wars both weighing on the performance of the Aussie dollar.
In raising interest rates to 2.25%, the US dollar is now a much more attractive currency to be holding from an investors point of view, versus the 1.5% on offer from Australia. With regard to the future prospects in this department, it appears likely that the US will be continuing to raise interest rates. This will only increase the trend we have seen of late and continue the pressure on the Australian currency.
On the subject of Trade Wars, these do not appear to be diminishing and therefore the Australian dollar should remain under pressure as these potentially intensify or remain in place. Expectations for the Australian dollar will continue to focus on its attractiveness to hold but with these issues continuing and wider concerns in the global economy about just what lies ahead, the Aussie might find more troubled waters ahead.
Next week is Unemployment data which will be a big driver on the exchange rate and could see a shift. There is a focus on Australian interest rates too and we could easily see this data impacting future decisions. Whilst no hikes are likely down under anytime soon, this is a more short term factor to move rates.
Thank you for reading this post and I would be delighted to speak to you if you have a currency transaction to make in the coming weeks. Please contact me Jonathan Watson on [email protected] to learn more.