It's been a rough 48 hours for the Aussie dollar. After a relatively good fortnight of consistent upward pressure, the release of lower than expected domestic jobs data weighed heavily on the AUD. With this in mind, today, one Aussie dollar will buy you:
0.6641 US dollars
71.2251 Japanese yen
0.5962 Euros
0.5112 Great British pound
0.8551 Canadian dollars
1.0387 New Zealand dollars
0.8833 Singapore dollars
Exchange rates are unpredictable, that's kinda their thing. While we can't guarantee how the Aussie dollar will perform, we can protect you against unexpected rate movements with Rate Move Guarantee. It's free, and if the exchange rate improves within 14 days, we will refund you the difference*.
Now, a closer look at what has impacted the Australian dollar this week.
Australian Jobs Data
This week employment data for October was released. Markets expected an extra 15k jobs were created, keeping the unemployment rate on hold at 5.2%. Instead, we were hit with an unexpected loss of 19k jobs and a rise in the unemployment rate to 5.3%. This is the first negative month of 2019. Further to this, wage growth also slowed to 2.2% in the year to September 30.
As you can imagine, this data is not good news for the Australian economy or the Aussie dollar. The economy is currently experiencing weakness as a result of poor business investment and household consumption, an increasing unemployment rate coupled with decreasing wage growth does not help the situation. If people aren't employed or experiencing wage increases, they are not spending as much, thus putting the breaks on our economic growth.
This week's data has increased the chances of another interest rate cut from the Reserve Bank of Australia. Markets are currently pricing a 64% chance of a 25 basis point rate cut in February, and a 30% chance of a cut in December.
Another interest rate cut spells bad news for the Australian dollar; however, as travellers, we might have to grin and bear it as it may be necessary to get our economy back on track. While we want the Australian dollar to be performing well for our travels, a weakening economy is a whole other issue that needs to be resolved asap.
Chinese Data
The Australian and Chinese economies are intrinsically linked, so the weak data that came out of China this week added another layer of downward pressure to the Aussie dollar.
Earlier in the week, Chinese industrial production and retail sales data for October was released. Both came in significantly under market expectations. Industrial production only rose 4.7% YOY despite being forecast to grow by 5.4%, and retail sales rose 7.2% after markets projected 7.8% growth.
Further to this, after last week's high hopes of a trade agreement between China and the USA, reports overnight are slightly less positive. The Wall Street Journal reported that China was cautious about committing to the numerical targets, and the Financial Times released that both countries are struggling to complete a Phase One deal. Currently, senior officials in Washington and Beijing are jostling over intellectual property provisions, agricultural purchases and tariff rollbacks. Considering they have been negotiating all week and there is no sign of significant progress, it could spell more bad news for the trade war and Aussie dollar.
US economy is performing well
While the Aussie economy is feeling pretty sluggish, the US economy seems to be experiencing some growth. So much so that US Federal Reserve Chair Jerome Powell said: "the risk of the US economy facing a dramatic bust is remote". All in all, he believes the recent economic expansion in the US has stable footing.
All in all, the combination of weak Aussie and Chinese data and uncertainty around the Trade War has left markets cautious. This is bad news for riskier investments like the AUD and NZD that thrive in 'risk-on' markets that result from more stable global economic conditions.
There are no major Aussie data releases until December 3 when the RBA makes their next interest rate decision. This means between now and then the AUD will mostly be affected by things happening in the broader global economy. What does this mean for you, the traveller? Well, keep an eye on what is happening with the trade war and China's economy, and sign up for Rate Alerts to ensure you're notified if and when the Aussie dollar is doing well.
This blog is provided for information only and does not take into consideration your objectives, financial situation or needs. You should consider whether the information and suggestions contained in any blog entry are appropriate for you, having regard to your own objectives, financial situation and needs. While we take reasonable care in providing the blog, we give no warranties or representations that it is complete or accurate, or is appropriate for you. We are not liable for any loss caused, whether due to negligence or otherwise, arising from the use of, or reliance on, the information and/or suggestions contained in this blog. All rates are quoted from the Travel Money Oz website and are valid as of November 15 2019. Terms and conditions apply to Rate Move Guarantee.
