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Political uncertainty pressures Australian dollar
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Published on 04.07.2016 07:30

The Australian dollar is trading lower today as political uncertainty sweeps through Australia with the possibility of a hung parliament emerging over the next few days.

At 3.13pm (AEDT) the Aussie dollar was trading at US 74.86c down from US74.96c in yesterday’s trading.

With the final outcome of the vote some days off, investors are expected to remain nervous and the local currency is expected to remain under pressure for the next few days, with the possibility that Australia may lose its AAA credit rating should a government fail to form.

“A hung parliament in Australia has not been historically conducive to good governance and policy reform, and the risk of losing the AAA/stable credit rating is not insignificant,” said Annette Beacher, chief Asia-Pac Macro Strategist at TD Securities.

The election is also expected to alter the tone of the monetary speech on Tuesday by the Reserve Bank of Australia after the latest interest rate decision hits the market during the Asian session.

Analysts are almost unanimous that the RBA will keep the cash rate on hold at 1.75 percent but the following speech is now expected to be more dovish on the back of global uncertainty connected with Britain’s decision to leave the EU.

The market is now expecting the RBA will once again leave the door open for a rate cut as we head in to the 2nd part of the year.


Andrew Masters

Analyst

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