According to Capital Economics’ research, the Australian dollar (AUD) is expected to hit US 60 cents in 2019.
The Australian dollar has been hovering around US 70 cents, but experts warn weaker local economic data combined with more interest rates increases from the USA’s Federal Reserve will put
“We have changed our view of the future direction of interest rates there as we now think that the ongoing downturn in the housing market will deepen, causing GDP growth to fall below potential,” Simona Gambarini from Capital Economics told clients.
The researchers believe Australian interest rates might actually fall before they go higher, despite being at a historic low of just 1.5%.
“In light of this, we think that interest rates are more likely to fall than to rise in 2019 and 2020,” Gambarini wrote in a note to clients.
As we reported here, falling Australian house prices have had a negative ‘wealth effect’ on consumers, which is leading some economists to fear a slowdown in consumer spending and lower-than-expected inflation.
This is combining with global economic uncertainty, especially from China, and a pullback in the prices of key commodities.
“We expect especially large falls in the prices of iron ore and coal, which together account for 30 per cent of Australia’s exports,” Gambarini added.
Overnight, sales data from computer chip maker NVIDIA Corp and mining business Caterpillar Inc reinforced the negative outlook for Chinese growth.
“Caterpillar and Nvidia are not the first companies to blame China for their afflictions, but both companies are seen as industry bellwethers and their disappointing results provide further evidence that this time China’s slowdown is for real,” NAB’s Senior FX Strategist, Rodrigo Catril says.
Whatever happens from here it’s clear there will be many winners from an Australian dollar decline, but also many losers.
Read Next
- It is time to top-up on these 2 ASX ETFs?
- A200 or MVW: a quick comparison
- A quick look at Vanguard Ethically Conscious Australian Shares ETF (ASX:VETH) and Vaneck Australian Resources ETF (ASX:MVR)
- What’s up with the SPDR S&P/ASX Australian Bond Fund ETF (ASX:BOND)?
- Looking to invest in Australian shares ETFs? Try these 2 ASX ETFs
Legal disclaimer: Chances are, the information you read on the BESTETFS website may contain a mix of factual information and general financial advice. Any information/advice on this website is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information and NEVER INVEST IN AN ETF OR MANAGED FUND BEFORE READING THE PRODUCT DISCLOSURE STATEMENT (PDS). If you don’t read the PDS you’re practically flying blind with one arm tied behind your back. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
