Australian dollar gains with election votes
07 July 2016 by News DeskThe Australian dollar rose on news that votes for the recent Australian election were slowly nearing a majority.
Australian Dollar (AUD) – The Australian Dollar gained against many of its rivals during Wednesday’s session, and easily capitalised on the Pound’s weakness.
The Australian dollar was boosted considerably as markets had previously speculated that a ‘hung parliament’ was incredibly likely, meaning an extended period of uncertainty for Australia.
While the process continued to advance slowly, a majority vote for Australia’s Coalition party looked to be even closer on Thursday’s session as Malcolm Turnbull’s party reached 73 seats.
New Zealand Dollar (NZD) – A strong New Zealand Dollar gained against a weak Pound during Wednesday’s session, and pushed the Pound even further down during Thursday’s Asian session.
With favour for the ‘Kiwi’ Dollar generally sturdy, and the FOMC indicating on Wednesday that an interest rate hike was not likely in the near future, NZD was bolstered across the board. It continued to soar on Thursday morning despite Sterling’s attempts to recover against most majors.
Sterling extended its decline on Wednesday evening, striking new multi-year lows across the board after more property funds suspended trading in order to prevent Brexit-influenced panic withdrawals.
Since Monday, six major property funds have frozen trades and prevented withdrawals. This means over half of Britain’s £25 billion property investment sector is frozen, with more expected to follow in the coming week. Analysts speculate that these will remain frozen for a lengthy period, as the funds will prioritise selling property over allowing investors to retake their funds. Some believe funds may be frozen for months.
Sterling plummeted as a result as investors looked for other UK assets to pour out of. 75% of small businesses use commercial property funds as loan collateral, subsequently a huge drop in these property prices could hinder the growth of smaller businesses and increase the chances of a recession.
The Pound attempted to bounce back slightly against many majors on Thursday morning as investors bought it from its worst levels.
US Dollar (USD) – The Pound to US Dollar exchange rate settled into a fresh 31-year low on Wednesday, as Brexit fears continued to fuel panicked market movement.
The June report of US Non-Manufacturing Composite ISM impressed by improving from 52.9 to 56.5 despite being expected to only hop to 53.3. However, with most markets concerned on how the Brexit (post-June) could affect US markets, this did little to influence USD movement.
Notably, the Fed released minutes from its mid-June meeting. The meeting indicated that policymakers were widely concerned at the possibility of a Brexit vote – a vote that came true. Policymakers generally agreed that before rushing into an interest rate hike, it was important to wait for the results of the EU Referendum and the consequences it brought.
Euro (EUR) – The Pound to Euro exchange rate neared a three-year-low during Wednesday trade as Sterling continued to fall on Brexit-influenced panic. The suspension in trade of multiple major property funds was the biggest hit to Sterling sentiment.
GBP/EUR has lost around 15 cents in the near two weeks since the EU Referendum’s Brexit result was announced. Notably, Wednesday night’s news revealed that Britain – previously the world’s fifth largest economy – had been overtaken by France as a result of the Brexit’s effects. Britain’s Gross Domestic Product (GDP – the key measure of a nation’s growth) dropped below France’s due to the Pound’s lower exchange rates. This brought UK GDP down to €2.172 trillion, with France ahead at €2.182 trillion.
Canadian Dollar (CAD) – The Pound to Canadian Dollar exchange rate hit a new two-and-a-half-year low during Wednesday’s session as the Pound dropped across the board on the latest Brexit fears.
While the commodity-sensitive ‘Loonie’ initially struggled due to news that oil prices had also fallen from Brexit-influenced panic, the Canadian Dollar eventually strengthened once the Federal Open Market Committee’s (FOMC) minutes were revealed, indicating that interest rate hikes weren’t going to be made any time soon and improving sentiment towards the Canadian currency.
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