AUD News: A week of Brexit votes and US CPI data keep AUD in tight trading range.

The major events affecting currency markets this week revolved around the neverending story that is Brexit. Aside from that, our Aussie Dollar has bumbled along with no major news able to push it out of a fairly narrow trading range. As it stands, one AUD will buy you:

 

0.6872 US dollars

75.4764 Japanese yen 

0.5993 euros

0.5129 Great British pound

0.8855 Canadian dollars

0.9996 New Zealand dollars

0.9032 Singapore dollars

 

 

The AUD/USD cross has remained in a relatively tight trading range this week. The US inflation data came in slightly weaker which supported the value of the AUD (slightly less confidence in the US economy put upward pressure on the Aussie Dollar). 

 

US core consumer price index (CPI) inflation (excluding food & energy) missed expectations in February. Core inflation reduced to an annual pace of 2.1% (consensus was 2.2%), this was down from 2.2% the previous month. Core inflation has been trending down since July 2018’s reading of 2.4%. 

 

In addition to this, there is a 34% chance of an interest rate cut by January 2020 in the US. This is a very different outlook to last year when the US Federal Open Market Committee (FOMC or Fed) were trying to give the market the impression that rates were going to be higher in 2019. 

 

Inflation informs interest rates, and interest rates have a major effect on the value of countries currency. Should the Fed cut US interest rates, this will put downward pressure on the value of the USD and, in turn, upward pressure on the value of the AUD. Investors will move their funds to a country that provides a greater return. More investment = more demand = higher value of the currency. 

 

In other news out of the US, their trade negotiations with China are continuing, however, there is nothing of real note occurring that we haven’t mentioned before. Trump doesn’t seem in any rush to sign a deal, nor do the Chinese. There’s plenty of optimism one day and then none the next. It’s still highly likely that both countries will reach a deal, it just might be slightly more delayed than originally hoped. 

 

Back in Australia, this week the consumer confidence index was released. As widely expected, it was not a great number - down 4% from a year earlier to 98.8 points. This shows that the Australian consumer is pretty cautious amidst the current property downturn and low wage growth. 

These domestic factors coupled with slowing global growth and the trade war mentioned above are affecting Australia's major export markets. Conditions like this are not pushing Aussie’s out into stores to spend.  

 

One currency that has not been particularly steady this week against the AUD was the Great British pound. You could compare its movements to one of those spew inducing rides that throw you up and down rapidly, without any real consideration for the riders enjoyment. 

 

Whilst we can’t reduce that sick feeling you get after said ride, we can give you some peace of mind with currency movements. Simply add Rate Guard to your purchase in store. If the exchange rate shoots up within 14 days of purchase we will refund you the difference*. The best bit? It’s free!

 

So what exactly happened with Brexit to cause such rapid changes in the exchange rate? Look, if we are being honest it was a lot of meetings that resulted in British MP’s, and the rest of the world, still having no idea what is going on with Brexit. We’ve tried to summarise it as much as possible below: