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Currency Analyst since 2010

AUD will depend on Australia's election results

Australian dollar returned below 0.7500 versus the greenback after the Brexit vote. However, AUD/USD is still holding above 0.7300.

Important thing to take into account for those, who trade Aussie, is Australia’s parliamentary election, which will take place on Saturday, July 2. The opinion polls show that the 2 competing parties have about the same amount of support, so, as it was with Brexit, the outcome is uncertain.

According to the experts, the victory of the ruling Liberal-National Party Coalition (L/NP) will be bullish for Australian dollar in the short term. On the other hand, if the opposition Australian Labour Party (APL) wins, AUD will suffer as the uncertainty will increase and Australia’s AAA credit rating will be in danger of a downgrade.

According to Nomura, the first scenario (bullish for AUD) is more likely. Credit Agricole points out that buying AUD/NZD will be the best strategy in this situation. However, it’s very important whether the party is able to secure a majority in parliament or not. If a minority government is formed (a government that doesn’t have more than half the seats in parliament and therefore can’t pass laws without the votes of parties not participating in the government), it will be the situation of uncertainty, and AUD will be under negative impact. 

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