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The Australian election results proved inconclusive with neither of the major parties gaining an outright majority and 13 seats hanging in the balance before the rest of the votes begin to be counted on Tuesday. A hung parliament is probably the most likely scenario at this stage, and from the current evidence it seems perfectly feasible for either major party to form a minority government, which again is not what the prediction markets were calling. The Aussie market is unlikely to welcome this news and the Aussie dollar has already lost 0.6% in early Monday trade. The market will be hoping that we don’t have to go through more than two weeks of waiting to find out which party will ultimately take power as we did in 2010.
Apart from the pre-Brexit spike, the Aussie dollar has spent most of June trading in a range of US$0.7350-US$0.7500. Political uncertainty could push the Aussie down to the lower end of the trading band, but Australia did survive a minority government recently and the wheels didn’t fall off the economy. The big rally in industrial metals over the past week and the comparatively high yield on offer in Australia after Brexit lowered the global interest rate outlook should continue to provide some support to the Aussie dollar despite political concerns.