AUD falls to 3.5 year low
|On Tuesday, the Australian dollar has slid to its lowest level since February 2016, reaching 0.7085 against the greenback. Even though the intensifying U.S.-China trade conflict has been weighting significantly on the Aussie, it is not the only factor. Indeed, as highlighted by September’s Westpac consumer confidence index that slid 3% from last month, Australian are turning more and more pessimistic. The recent decision from three of the four largest lenders to increase mortgage rate, persistent pressure on household budgets as well as political instability.
On the political side, the centre-right movement could lose its parliamentary majority, as it will face a by-election on October 20 following Malcom Turnbull’s resignation from parliament last month. Given the mounting popular dissatisfaction generated by the political turmoil, voters will be tempted to punish the ruling conservative coalition.
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With the interest rate differential between the US and Australia that continues to narrow and Trump’s strong tendency to add fuel to the fire, which could only make negotiations with China more difficult, the Australian dollar is not out of the wood yet.
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