The Australian dollar has gained the most since January

20.05.2019 09:21|Conotoxia Ltd Analyst Team

The Australian dollar has been systematically losing value since mid-April, when the AUD / USD rate was at the level of 0.72. This situation was mainly due to the deteriorating economic situation in Australia, in particular the decline in property prices, which resulted in poorer consumer sentiment and lowered prospects for consumption growth.

In addition, recently the unemployment rate has risen to the highest level in 8 months, which, according to the market, has increased the chances of interest rates cut by the Central Bank of Australia (RBA) already this summer. Another risk for AUD was the parliamentary election, where as we can see after today's market reaction, a significant part of its participants expected a change in power. With a slowdown in the economy or the escalation of the trade war, any changes in policy only add uncertainty, and political stabilization in the country becomes desirable.

The center-right government of Prime Minister of Australia Scott Morrison will lead the parliamentary majority, and his Liberal-National coalition will secure 77 seats in the 151-member lower house. Thus, it is quite clear what a small advantage the current government guaranteed to have further control over the policy pursued in Australia. As a result, the AUD/USD pair price rose by about 1 percent, which is the largest one-day increase since January this year. According to traders quoted by Bloomberg agency, short positions on AUD/USD were to be closed quickly (short squeeze), and foreign funds as a consequence of the election result were to start buying Australian assets, including currency.

Currently, the market values the chances of interest rate cuts by RBA in June at 57%. In turn, the likelihood of a cut in August was 45 percent. The next decision of the central bank is already June 4.

 

Daniel Kostecki, Chief Analyst Conotoxia Ltd.

Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.

59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.23% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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