Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.
An equities sell off on Friday night in the U.S and Europe saw the the local market down over 1% yesterday while the AUD and commodities also succumbed to the negative sentiment across markets. AUD/USD which had reached as high as 0.7170 on the wholesale market late last week is now down around 100 points from that level. Thankfully the losses on Friday didn't follow through when U.S and European stocks opened last night with the Dow, Nasdaq and S&P all finishing more or less flat.
Gold & Silver Bid:
Gold and Silver, which typically perform well in times of fear not surprisingly surged through yesterdays trade with Gold up about 30AUD an ounce while Silver was up 1%. Iron ore prices remain robust but are off the highs we saw early last week, while other base metal prices are holding up quite nicely, as expected.
Forward Contracts When AUD Dropping:
Speaking to import clients recently about the AUD tells me a few things, first is importers appear overly optimistic about the prospects for the AUD and what I mean by that is that many thing we have based out around the low 0.7000's on the wholesale market. However another jolt to financial markets or continued local poor economic data could see the Reserve Bank of Australia forced to cut interest rates to record lows, this would be a negative for the AUD no matter how you look at it. Consensus forecasts, and by that I mean the majority of forecasts have AUD in the 60's over the next 12 months vs the USD, and while that's not what importers want to hear that's unfortunately the reality that we should start to prepare for. Clients wishing to hedge their exposures can do so with a Forward Contract, please call me to discuss as it's probably the best strategy to mitigate foreign currency risk.
AUD EXCHANGE RATES:
AUD/USD – 0.7081
AUD/GBP – 0.5358
AUD/EUR – 0.6255
AUD/NZD – 1.0260
AUD/JPY – 77.958
All Ords (XAO) – 6,208
Gold – A$1,859/oz
Silver – A$21.85/oz
WTI – US$59.10/barrel
DATA RELEASES TODAY:
USD - CB Consumer Confidence at 1.00am