Market Update – 8th May 2019 – AUD Bounces, But Risk Assets Still Under Pressure + How To Use Forward Contracts

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.

AUD Bounces Back:

Since yesterday morning the AUD has rebounded around half a percent vs. the majors (excluding the JPY), thanks to a less bearish Reserve Bank of Australia who kept rates on hold and a more robust than expected local retail sales figure, all of which were released through the course of yesterday. U.S & European equities and commodity prices still lost ground overnight though as traders pared positions in risk assets amid the latest trade tensions between Trump and China. All in all, overnight U.S equities had their worst session in 2 months, while commodities prices (excluding Iron Ore) are around their lowest levels since Feb/March.

Where is the AUD Headed? 

Well that IS the million dollar question and it really does depend who you listen to. But having said that, the skew now is clearly towards an interest rate cut (at some point) between now and August. At least that’d what interest rate futures and the bank chief economists are telling us. Should this eventuate then obviously the AUD will remain under significant pressure and a downward bias; that is the harsh reality for Australian importers. A low AUD will assist our export market, but Aussie importers will have to content with finer margins.

How To Combat A Lower AUD? 

Thankfully, there is a way to combat a lower AUD and that’s via a simple Forward Contract. Forward Contracts, lock in a rate (say 0.7000) and amount (say US$100,000) today for a future date (say August 31st), and it’s put to good effect by many of our clients on a daily basis. The benefit is that Importers lock in their profit margins for known purchases and it means that if in August AUD/USD is trading at 0.6500 then you’ll be trading at 0.7000. It really is a fantastic product in a falling market, and I encourage you all to reach out to me to discuss how you can utilise this product to make your business more efficient.

AUD EXCHANGE RATES:

AUD/USD – 0.6981

AUD/GBP – 0.5333

AUD/EUR – 0.6233

AUD/NZD – 1.0601

AUD/JPY – 77.000

OTHER MARKETS:

All Ords (XAO) – 6,383

Gold – A$1,831/oz

Silver –  A$21.25/oz

WTI – US$61.63/barrel

DATA RELEASES TODAY:

No data

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Patrick Downes

Senior Corporate FX Dealer

Phone Patrick – 0431 278 632 

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 DISCLOSURE AND DISCLAIMER – GENERAL ADVICE WARNING
The information provided in this report has been prepared without taking into account your particular objectives, financial situation or needs. You should consider whether our products are appropriate for you and read the FSG and PDS which are available on this website.
This report and must not be copied, either in whole or in part, or distributed to any other person.
All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
This report is provided for Australian residents only and is not intended for use by residents of any other country.

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