Trump speech gives Aussie dollar a boost, but market uncertainty remains

US President-elect Donald Trump was behind a lectern again overnight and his words prompted the Aussie dollar to spike—but experts say now is not the time to be making long-term predictions about currencies and markets.

Trump’s hour-long conversation with the US press didn’t hold details of big infrastructure spending plans or future policy initiatives in areas like corporate tax reform. Instead, the President-elect spoke about his plans for his own business interests while acting as President and discussed intelligence memos and Russia.

The Australian dollar was sitting at US73.75c before Trump took to the stage, and rallied to US74.72c while he spoke. This morning at 10:00am (AEDT) it was sitting at US74.8c.

Other major currencies also strengthened overnight as market’s had hopes dampened that they would get a clear outline of some of Trump’s economic policies, with US shares falling about 0.3% overnight.

However, head of treasury at OFX Will Shepherd says that while he believes an Australian dollar at around US75c is a good position, the impact of a Trump presidency has much more to play out.

“It’s hard because it’s not really an Aussie story, it’s a US story. The Aussie dollar is just along for the ride,” Shepherd told SmartCompany.

While business owners will no doubt be interested in new announcements from the president, Shepherd says they should remember events in the US are not the only factors that influence the value of the Australian currency.

“Ultimately you look at the Aussie [dollar] as a commodity currency as well,” he says.

“Overnight the Saudi government cut the oil output more than expected—when you’ve got things like that also will have an effect,” he says.

Shepherd says those interested in the effects of the US on the broader global economy should also be watching things like bond prices, which will give an indication of how the world is responding to events like Trump’s plans. And with a number of weeks until the President-elect’s inauguration, it’s likely rhetoric will play a big role over coming weeks, Shepherd says.

Westpac senior currency strategist Sean Callow says what the President-elect says will affect market activity in the years to come, and Australia will have to pay attention, according to the ABC.

“It’s certainly going to be something we can’t ignore in the markets, we have to focus on politics,” he said.

Economists at CommSec agree that Trump will be a significant factor in Australia’s market and business landscape in 2017, but in its “The Big Issues of 2017” paper released by chief economist Savanth Sebastian, CommSec’s analysis of US politics acknowledges “as to what is actually implemented remains to be seen”. 

Watch the President-elect’s full press conference below.

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T.J . Antipodes
T.J . Antipodes
5 years ago

if the dollar rises our business chances dissipate. We are a high cost, high overhead country and not competitive with a high dollar.