The AUDUSD exchange rate could show volatility with the US election and Reserve Bank rate decision on Tuesday.
AUDUSD – Daily Chart
The price of the AUDUSD exchange rate has slumped recently below the 0.66 level. There is support for a potential bounce but moving below that level opens up support to 0.64.
Donald Trump and Kamala Harris are tied in a dead heat for the US election, with the leads in the swing states being key. The S&P 500 index has given up recent “Trump trade” gains as investors are unsure of the outcome.
“I think it really is a defining moment for the United States,” said Sky News correspondent David Blevins, in Washington DC.
“It has been the ‘divided states’ for quite some time now. The polarisation is deep. We see in the swing states just how close the margins are”. Tuesday voting and final result.
In Australia, the focus will be on the Reserve Bank’s latest interest rate decision. Analysts expect the bank to hold rates steady until February, but the press conference will be important to gauge the bank’s preferred path on rate cuts.
The RBA’s board is expected to remain cautiously hawkish and is likely to highlight a need for a restrictive monetary policy as updated forecasts are set to show core consumer prices remaining elevated.
The recent trends have shown a strong labour market, stubborn inflation and a deteriorating global economy. Geopolitical strains have been an issue with North Korean troops joining the Russia and Ukraine conflict. A victory for Donald Trump could also reignite global trade issues.
“Globally, there’s more uncertainty than usual and coupled with the domestic data, argues for caution and patience from the RBA,” said Su-Lin Ong at Royal Bank of Canada. “Top of the list of uncertainties will be the US election — both the presidency and composition of the Congress”.
Economists will have an interest in any mention of the Chinese economy in the RBA’s commentary. China buys almost a third of Australian exports and has a large influence on the nation’s economic stability.
Australian treasurer Jim Chalmers said recently that China’s new stimulus effort was a “really welcome development” for both Australia and the world. Chalmers pointed to weak demand in China as one of the key factors that have been weighing on Australia’s economy.
Despite Australia’s weak growth, the RBA isn’t prepared to cut rates yet with Governor Michele Bullock saying that inflation needs to move “sustainably” inside the 2-3% target.
