Updated: Jan 23
Tuesday November 3rd, another potential risk event for currency markets in 2020.
Well 2020 has already thrown up more risk events than we could have ever imagined, however it's not over yet and with the US election around the corner, there is plenty more room for volatility in the coming weeks for the currency markets as we head towards the Trump and Biden showdown. Back in 2016 when Trump shocked the world with his win, The AUD to USD exchange rates were sitting at a 6 month high at 0.7778, in the following 10 days after his win, The AUD dropped almost 6% reaching a low of 0.7330 before finding some recovery in the months to follow. The exchange rate found support at 0.7159 back in late December 2016 before making it's recovery run, this time however we are seeing The AUD/USD rate starting at a much lower point, with rates falling as low as 0.7044 today with a little support showing at around 0.7010, this time if another 6% drop was to occur, we would be headed for the February 2020 lows of 0.67c.
Of course, this would be history repeating itself, and while no-one knows what the outcome will be, this is only to give you a heads up of a potential decline in the AUD/USD exchange rates, should such volatility occur.
Currently, many analysts are pointing towards a Biden win and a Democratic outcome, with this they feel a cooling of tensions with China and more fiscal expansion, which in turn could see a sell off in the USD, and thus see an improvement in the Australian Dollar.
Away from the US and in local events, the RBA released the minutes of their most recent meeting, they provided an update that they have spoken and explored the outcome of reducing interest rates even further, and towards 0%, this is providing more pressure on the local currency and as such we have seen an approximately 3% sell off in The AUD in the past week, with rates now slowly dropping towards the 0.70c mark.
In my experience around these events is that it can see plenty of wild swings, both for or against the Australian Dollar.
These outcomes can affect everyone, importers, exporters, clients with overseas property or investments. If you, or anyone that you know could benefit from speaking with me, please contact me and I'd be happy to assist.