Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.
It’s all about the data today with the latest retail sales numbers and Current Account data due at 11.30am. Retail sales numbers are expected to remain weak at 0.2%, while the Current Account (the difference in value between imported and exported goods) is expected to go positive for the first time in 44 years – yes you heard that right. What a Current Account surplus means is essentially Australia is exporting more commodities, education and travel than importing goods. But all this extra export trade doesn’t seem to be supporting the AUD which over the past 18 months has lost around 14 cents vs. the Greenback. In the same period we’ve lost only 240 points vs. the GBP as they struggle with their own Brexit shenanigans, while vs. the Euro we’re down around 400 points. Clearly the biggest winner in the trade war with China has been the USD and Australian exporters, but clearly not the AUD.
The Cash Rate is next cab off the rank at 2.30pm this afternoon. The market is not pricing in any further cut to the cash rate which currently stands at a flat 1.00%, however that doesn’t mean we won’t see volatility at 2.30pm. The RBA while likely to keep rates steady, may start to telegraph a cut in the accompanying commentary. So those importers wishing to avoid volatility would be encouraged to book ahead of the announcement.
A lot of clients asking me about Forward Contracts at the moment so I’ll give another quick demonstration, but for further details please call me.
A Forward Contract allows both importers and exporters to hedge/book a future FX payment (say three months down the track) at todays rate. A small deposit of 5% is usually required to do this, but the benefit is that if rates move lower (for an importer) or higher (for an exporter) then you’ll be hedged at the rate you booked today.
Live example for an importer:
AUD/USD at 0.6700 today, book 100K USD Forward Contract at 0.6700 for end of November – AUD payable is A$149,253
Come November AUD/USD is trading at 0.6500 – total AUD payable buying at spot would be A$153,846
Client uses Forward Contract at 0.6700 and saves A$4,600.
AUD EXCHANGE RATES:
AUD/USD – 0.6684
AUD/GBP – 0.5533
AUD/EUR – 0.6090
AUD/NZD – 1.0614
AUD/JPY – 71.000
All Ords (XAO) – 6,677
Gold – A$2,273/oz
Silver – A$27.40/oz
WTI – US$54.60/barrel
DATA RELEASES TODAY:
AUD – Retail Sales m/m at 11.30am
AUD – Cash Rate & RBA Rate Statement at 2.30pm
USD – ISM Manufacturing PMI at midnight
Sign up for a Compass account today and access some of the most competitive rates in the business and arguably the best service.
Senior Corporate FX Dealer
Phone Patrick – 0431 278 632
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All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
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