Market Update – 21st November 2017 – AUD/USD Could Be Headed Lower If 1999-2000 Is Any Indication

Stocks and commodities rallied overnight led by the U.S Dow Jones Index and Iron ore prices respectively, however the bullish sentiment here didn’t support the Aussie dollar with AUD/USD falling again, this time testing 0.7543 (about where we are at the time of writing).

As I mentioned in yesterday’s report I asked for anyone who recalls a period when U.S interest rates went above Aussie interest rates and none other than our chief strategist Tony Boyadjian out of our Sydney office was good enough to get back to me – “Last time Aussie rates fell below US rates was between June 1999 & Dec 2000. A$ fell from 66US to 48US.” Now while history doesn’t repeat it certainly does rhyme and so it may be worthwhile for importers to look at incorporating some form of hedging into their FX requirements. This is an area I can help clients with and an area the banks tend to be reluctant to help SMEs given the costs associated for the bank. We don’t have those same costs so hedging is actually quite an affordable option for SMEs looking to protect their downside risks.  And again I want to reiterate I’m not suggesting AUD/USD is heading towards 0.4800 however we may see a correction to the downside should the U.S Federal Reserve hike interest rates four times in 2018.

Ahead today we have RBA Monetary Policy minutes followed by speeches from the RBA Ass. Governor and Governor himself Philip Lowe. As such probably expect a little more volatility than normal today.

AUD EXCHANGE RATES:

AUD/USD – 0.7543

AUD/GBP – 0.5703

AUD/EUR – 0.6433

AUD/NZD – 1.1087

AUD/JPY – 84.979

COMMODITIES: 

Gold – A$1693/oz

Silver –  A$22.44/oz

WTI – US$56.37/barrel

DATA RELEASES TODAY:

AUD – Monetary Policy Minutes at 11.30am

AUD – RBA Ass. Gov Bullock Speaks at 2.50pm

AUD – RBA Gov. Lowe Speaks at 8.05pm