From time to time, the mainstream media will elicit headlines to stir the pot, pointing to the Australian dollar depreciation to 65 US cents or even 60 US cents. Whilst this may be a spotlight grabbing headline that actually results in constructive thought and discussion on the topic, it is important for everyday investors to understand the dynamics at play and to ensure that they make the right decisions regarding their own portfolios.
If we remove the most recent “flash crash” that was caused more by market malfunction, stop-loss triggering and holiday liquidity than any fundamental analysis, AUDUSD has more-or-less traded between 0.7000 and 0.8000 for the last four years. Without a large-scale global event (as opposed to a threat of an event), there is no reason to believe that, with the Fed on a slower hiking trajectory, this range will not hold for the rest of 2019.
Whilst some factors such as Brexit, US interest rate rises and the initial China-US trade war may add to market instability, there are many other drivers that contribute to the actual trading value of the AUDUSD foreign exchange (FX) rate.