The Australian dollar has weakened overnight as investor focus shifts towards the now wider split between the US and Australian interest rate. With Australian interest rates at 1.75%, but the US now at 2.5%, the US dollar is a more attractive currency to hold and it has gained ground against the Australian dollar, weakening the Aussie in the process. The US raised interest rates overnight and are expected to raise further in 2019, despite many views to the contrary. This could see more pressure on the Australian dollar in 2019.
The economic news out of Australia overnight too was fairly positive with the Employment rate and the employment change, month on month both posting gains. This shows the Australian labour market is performing well and if such news continues in 2019, could be more supportive for an interest rate hike down under, which has so far been so elusive. The Australian dollar is likely to endure a mixed bag as we enter 2019 with the market closely following the latest news on US and Australian interest rates.
Global trade has been another factor driving the Australian dollar as the market ponders the possible negative effects from Donald Trump’s Trade Wars with China. With Australian trade relations with China forming a major part of the Australian economy, the market has been closely monitoring the sentiments on the Trade Wars, plus the possible negative fallout from any economic woes. The fact the Australian currency acts as a barometer of global trade and risk sentiment, owing to its economies close relationship to traded commodities like Coal, Steel and Aluminium, makes it all the more sensitive to such news.
Confidence is still holding in global markets but it does seem many are looking into the future with less reasons to be optimistic. This could ultimately spell trouble for the Australian dollar in 2019, particularly if the Trade Wars deteriorate further and the US presses ahead with their economic plans.
If you are looking to buy or sell Australian dollars then please do get in touch to discuss the latest news and forecasts. With the currency so sensitive to global news and developments it is important to understand all of the latest news and events to move the rates.
Thank you for reading and please contact me Jonathan Watson to discuss further.