CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Australian dollar hits new low before bouncing as Australian liberal party elects new Prime Minister

The Aussie dollar dropped down 0.1% at 72.38 cents before bouncing as Scott Morrison wins leadership vote


bg_australian flag
Source: Bloomberg

Hours before Australia's 30th prime minister was announced the AUD dropped 0.1%, before bouncing to 72.90, after Scott Morrison won the leadership vote.

45 members won the vote to elect Scott Morrison as the new prime minister, with 40 voting to back former prime minister Malcom Turnbull.

Australian shares previously fell 1.5 % since the first leadership shakeup earlier this week, with investors remaining cautious of the political instability.

However, despite the unknown leadership changes, ASX200 opened higher than expected on Friday.

IG market analyst Kyle Rodda says the changes are unlikely to impact the Reserve Bank of Australia’s outlook.

'Given interest rate markets aren’t pricing in a move from the RBA until early 2020, and that the RBA does not expect to achieve its inflation target until around the same time, it’s unlikely that the Government’s leadership issues will change the RBA’s outlook on interest rates.' said Mr Rodda.

He predicts interest rates will likely stay at 1.5% till 2020, but may still be risks involved if Australia enters future political uncertainty.

'The major risk is if we enter a protracted period of political uncertainty, one that results in an election and change of government, that the economy’s fundamental may suffer because of reduced sentiment.

Only at that point will the RBA seriously factor in politics into their policy considerations, but at this point in time, the risk of this is still small.'

The ASX has given up 130 points from the 10-and-a-half year highs achieved last week, taking the market at close of trade yesterday to a familiar support level just above 6240.

The liberal party room meeting was held on Friday at 12.20pm (AEST) to determine the new prime minister, also electing Josh Frydenberg as deputy prime minister.

Former Prime Minister Malcolm Turbull said in his final address as Prime Minister that he would leave parliament "not before too long". 



This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Find articles by writer