Australia gets a new Prime Minister, Anthony Albanese. The AU to US Dollar trades at the psychological level at 0.70 as PM Albanese takes over.
AU to US Dollar Holds on to 0.7033 as Australia Elects Anthony Albanese
The Australian Dollar swept past the $0.70 area last week. Despite a downturn on Friday, the AU to US Dollar held on to the 0.70 level. The country chose a new prime minister last week.
There is a lot of concern at this level at 0.70. A break below this level may bring the AUD/USD to the 0.68 level.
Scott Morrison accepted defeat on Saturday after the conservative party lost the elections. People voted against Morrison for not addressing climate change issues. Drought, bushfires, and floods are rampant in Australia, highlighting the defects of the Morrison government. Morrison has led the country since 2018.
The Labor party will form a new government after winning the elections. Albanese had promised to end climate wars and look into the polluting emissions that hurt the environment.
More than seven million people cast their votes in Australia.
Albanese has to address various issues in Australia. Australia gains high revenue by exporting large quantities of fossil fuels. The Labor party promised to cut emissions and control climate change by 43% within eight years. By 2050, the party hopes to reach net-zero levels.
The Covid pandemic has left scars on the economy and lowered opportunities in the job market. The unemployment rate is at 3.9%, as the country faces high unemployment problems, at levels last seen 48 years ago. However, employment change in the number of people employed has dropped to 4.0k from the previous month’s figure at 20.3k. Good signals from the job market pulled the AUD/USD from lower levels to trade at 0.7033.
The cost of living has increased with the economic turmoil and high inflation. CPI is at 5.1%, and PPI year-on-year is at 4.9%.
The wage price index at 0.7% is lower than the expected 0.8% data. The CB leading index month-on-month has improved from 0.3% to 0.6%. It shows that the direction of the economy is positive.
Shanghai is expected to resume business with Australia in June. The economy may see a rebound once demand increases. China will reopen its economy in June after the pandemic lockdown. It is positive news for the Australian Dollar, and the country expects better economic activities soon. The US Dollar to AUD trades at 1.42
RBA Hikes Rates
The RBA official cash rate, which was placed at 0.1%, saw a hike to 0.35%. It is the first rate hike after November 2010. Quantitative tightening is expected from the central bank. The RBA states that it would do what is necessary to bring down inflation to reach the target of 2%.
Inflation remains at 5.1%, much lower than the US inflation at 8.5%.
Many countries have increased interest rates in reaction to high inflation. The US, the UK, New Zealand, Norway, and Sweden have raised rates.
The RBA hints at a rate hike in the upcoming meetings to bring down inflation. Analysts predict a hike of 40 bps.
The war in Ukraine has caused a surge in inflation in countries across the globe. Heavy floods in most parts of Australia have added to supply constraints. The unemployment rate is at a 48-years low of 3.9%. Public debt levels are high in Australia.
Quad Members to Meet On May 24
Quad members will meet next week to discuss matters regarding the Indo-Pacific passage.
Leaders from the United States, Japan, India, and Australia prepare to meet in Tokyo on May 24 to discuss foreign policies. Economic policies and security policies are to be discussed at this summit.
Steps to counter China’s growing power will be given top priority. China has driven poorer countries into large debt traps that have led to their economic downturn. The recent downturn in Sri Lanka is an example. The debt trap has come under heavy criticism.
Issues like climate change, cyber security, and terrorism will be the hot topics under discussion at the summit.
US Dollar Trades Above 100 Levels in May 2022
The US Dollar gathers strength against most currencies. Inflation is at a 40-year high, and a hike in rates is imminent to prevent further escalation in commodity prices.
The Dollar index closed for the week at 103.173 on May 20. The greenback trades above the 100 mark in May. High inflation has brought down the value of the British Pound, the Euro, and the Japanese Yen. The strengthening Dollar Index has further weakened major currency pairs.
The AUD/JPY is range-bound at the 90.00 levels. The Aussie Dollar to Japanese Yen closed at 89.92 for the weekend.
AUD/NZD closed on Friday, May 20, at the 1.0999 levels. It was on a losing streak last week.
Policy schemes drafted by the new prime minister will determine the trend of the AU to US Dollar currency pair direction.