DCN0718_Combined_150

AUD/USD
Australian dollar/U.S. dollar, 1D, FXCM
Vol (20)
Published on TradingView.com, June 12, 2018 19:19 EST
FX:AUD, ID 0.75731 s +0.00049 (+0.06%) O:0.75682 H:0.75768 L:0.75676 C:0.75731
Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18
AUD/EUR
Published on TradingView.com, June 12, 2018 19:8 EST
FX_IDC:AUDEUR, ID 0.6444 t -0.0003 (+0.05%) O:0.6449 H:0.6449 L:0.6444 C:0.6444
Australian dollar/euro, 1D, FXCM
Vol (20)
Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18
0.81000
0.80000
0.79000
0.78000
0.77000
0.76000
0.75000
0.74000
0.73487
0.73000
0.6700
0.6650
0.6600
0.6550
0.6500
0.6000
0.6400
0.6349 0.6350
0.6300
0.6400
0.6200
0.6150
depressed global growth. This has
continued for 10 years in the ECB,
Bank of Japan, RBA and RBNZ. As their
economies continue to struggle to get
on top of deficit/debt levels and stunted
growth they have maintained extremely
accommodating monetary policies. The
US, in contrast, has boomed recently
and is rapidly returning to a normalised
monetary policy. This has been reflected
in inflation, growth and employment
leading to rising interest rates. The Fed
has been raising rates over the last two
years and look set to continue to do so.
They operate on an island. US growth
has pushed interest rates up, as demand
surges, while a reasonable return on
money promotes competition for the
investment dollar. Normalised monetary
policy is a place where all economies
wish to be, but indebtedness, sluggish
growth and instability remain a curse to
other western economies. Rising interest
rates support a stronger currency so
expect the US dollar to appreciate over
most currencies in the coming year.
Therefore, recent currency
fluctuations are rather exaggerated when
measured against the USD, as opposed
to the EUR. e.g. the trading range of the
AUD/USD this year has been 0.7430-
0.8130 (700 points or a 9.5% fluctuation)
while the AUD/EUR has moved from
0.6200-0.6550 (350 points or a 5.5%
fluctuation). This continues to hold true
as the EUR moves more in line with
the AUD, versus the reserve USD (N.B.
their respective central banks occupy
a similar space in dramatic contrast
to the Federal Reserve). It is therefore
even more important for businesses
to address foreign currency risk and
ensure it is managed effectively. The risk
factors and protection against exchange
rate movements are essential. Foreign
exchange cover should, therefore, be
even more comprehensive for the USD
as fluctuations are more likely to be
even greater. Take the risk out of foreign
exchange exposure.
CENTRAL BANK INFLUENCE ON
THE MARKETS
Central bank influence has been more
dominant in markets since the GFC.
The GFC encouraged record-breaking,
expansive monetary policy to combat
massive debt levels and stimulate
SUMMARY
Markets operate on confidence and
removing geo-political obstacles provides
a conducive environment in which
to operate. The focus then shifts to
global economic data and the health
of the individual countries economy
and fiscal/monetary policy. Monetary
policy has dominated interest rates, thus
currencies, forcing effective management
of foreign exchange risk. Financial
tools can remove this risk and allow
the orderly function of a business in an
international environment. Risks in the
near future, remain the trade wars and
unforeseen geo-political events while
global economies improve.
thedcn.com.au July 2018
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