In today’s GBP to AUD forecast I’ll discuss how the US midterm results could prove beneficial for the Australian Dollar.
The Democrats have have now gained power over the House of Representatives which will be a cause for concern for President Trump. They will now be able to severely limit new legalisation being passed. The Democrats will also have control of the Intelligence Committee, which means they will have the chance to scrutinise information regarding the allegations against the Trump administration in relation to any collusion with the Russian Government in Donald Trump’s Presidential campaign.
Depending on how the Democrats utilise there new power it will have varying degrees of affect on the US Dollar. If President Trump’s position was threatened you would expect some significant weakness for the Greenback due to the political uncertainty.
How could the US Midterm results affect the Australian Dollar?
The US Midterm result could have impact on the Australian Dollar as many investors have been choosing the US Dollar as their currency destination of choice. This new development could well influence their decision. The Australian Dollar is considered a riskier commodity based currency, whilst the US Dollar has been considered a better investment due to it’s safe haven status and promise of higher returns. The Federal Reserve currently have interest rates set at 2.25% with the possibility of a further rate hike this year. Ten year bond yields are also at their highest in several years.
This new development could cause Australian Dollar strength.
RBA comments could be a concern for the Australian Dollar?
There is concern over the fall in house pricing in Australia at present, which is the result of foreign investment in Australian property. Tomorrow we will see the Reserve Bank of Australia (RBA) Monetary Policy statement will be watched by investors to see if any hint to monetary policy moving forward is given. If this is the case we can expect volatility on the market.
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