The Australian dollar’s position might have weakened during Monday’s trading following a slight contraction of -0.2% reported in the ANZ commodity price reading. The release is produced by the National bank and can be used by investors as a early gauge into the prospects of the Australian dollar given how closely tied the currency is to the performances of the country’s leading commodities. The fall in price hear could choke appetite for the AUD as a result. Further compounding this was yesterday’s trade balance release for the month of august, showing yet another widening deficit to -2,643M. Yet again, for a currency so dependent on its outbound business, the lack of demand for it’s exports could cap growth for the AUDGBP in the long run. Importantly tomorrow seed the ANZ’s latest business confidence report which could well set the trend for the Australian dollar as the week comes to an end. If business confidence remains high despite these troubling releases, you could argue investors will buy into the idea hat the widening trade deficit was just a COVID developed blip. Those looking to buy foreign currency with Australian dollars might want to reach out to their account manager and plan around this release as a result.
AUDGBP: What Might Help the Australian Dollar Find Momentum Once More?
AUDGBP has failed to recover the impressive highs in the 0.57s in September when it capitalised on a weakening pound as a result of shaky Brexit talks. This trend has certainly flipped as a result, with AUDGBP very much anchored under the 0.56 mark so far this month on interbank exchange rates. It will interesting to see if this levels are breached in the second half of this month however, particularly since the European commission sent it’s formal notice of the UK’s breaching of it’s obligations to the withdrawal agreement signed at the start of the year.
Equally last month, those looking to buy euros with Australian dollars were enjoying slightly higher levels. Evidently the spread of the second wave across some of the blocs major states had begun to weigh on consumer confidence however it seems appetite has started to stabilise ahead of this month’s EU summit due for the 15th of October. The European Central Bank will produce it’s latest stability accounts report on Thursday which might provide extra clues and so is wort monitoring as a result. Interestingly, conditions do seem to be improving across the zone. Spain recently recorded a fall in unemployment by more than 20k over the course of last month, this despite the building unrest in Madrid as the population faces similar restrictions to measures taken in Victoria. Equally, after a long run of disagreements, Brussels has managed to reach an agreement on the €745bn recovery fund across EU leaders which might go some way to building investor and business confidence. Something to consider if you are in the market for euros.
Morrison Government Scheme: Will the Short Term Injection to Support Consumer Spending Drive the Australian Dollar’s Value in the Long Run?
Friday’s Financial stability review from the Reserve Bank of Australia could also be a market mover. The RBA have long been focussing on the growing concerns of an unbalanced lending market, with household debt accelerating even before Covid-19 took hold of the markets. Reaction from this release may lead to further opportunities to buy Australian dollars should levels differ from market expectations.
On the flip side, the increased policing within Australia’s COVID-19 hotspots has helped control the outbreak with the state of Victoria managing to report it’s lowest fortnightly average of new infections. The second wave which came months ago prompted one of the strictest lockdown responses seen so far since the outbreak. This had begun to weigh on consumer spending levels in the area and in turn business confidence also took a hit which may have started to sway investor appetite for the Australian dollar, particularly if we didn’t see a turnaround soon. Now that we are seeing positive signs here, might we see a change of fortune for the Australian dollar too?
It will be interesting to see if the Morrison government’s $98bn recovery budget also helps spearhead an Australian dollar surge. The scheme zones in on providing immediate support, with $10bn placed towards creating jobs quickly via investment in infrastructure and major road works.
At the other end, the scheme includes an impressive wage subsidy to the unemployed under the age of 35 and a considerable cut to personal income tax that will affect 11 million Australians, both angled towards relieving the pinch felt by consumers during the crisis and help stimulate household spending throughout the year ahead.
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