AUD News: Inflation's impact on AUD and the cost of travel

During October, the AUD traded in a two cent range against the USD, starting the month at 0.7230 and finding a low of 0.7025 around 26th October. It has recovered slightly, ending the month around 0.7070. 

 

This is around a 3% range which may not sound like much, but if you were to exchange $2,000AUD at the start of the month at 0.7230 you would have been taking $1446USD to the States. Exchanging the same amount at the low of 0.7070 left your pocket $32 lighter, with only $1414USD.  Considering $32 equates to two I <3 NY t shirts and a classic hot dog from a New York street vendor, a rate of 0.7230 is a day’s lunch and souvenirs for your parents sorted. 

 

American politics will be a major focus from here until Wednesday morning (Australian time) when results from the US midterm elections begin to filter through. Betting markets show that the House of Representatives is likely to see a Democrat majority, while the Senate should see the Republicans take the lead. Hang tight until Wednesday to see if this is actually the case. 

 

 

Back on Aussie shores, yesterday’s soft Australian Consumer Price Index (CPI) data and lower commodity prices kept the AUD below 0.71 against the USD. 

 

CPI figures show that Aussie inflation has risen by 0.4% for Q3 of 2018, bringing year on year inflation to 1.9% This increase was primarily supported by the rising cost of holidays, accommodation, petrol and tobacco. However, these figures were undercut by a double-digit decline in the cost of childcare. 

 

Top travel tip: Purely based on inflation, save costs by leaving the kids in childcare while going on vacation... Just kidding, obviously. 

 

Actual travel tip: Pay attention to inflation when planning the foreign currency for your next trip. Why? Inflation shows the cost living (and travelling) and has major implications on interest rates. Interest rates have a major influence on foreign exchange, and can affect investors’ decisions, and the resulting value of the AUD. 

 

Inflation has been below the Reserve Bank of Australia’s (RBA) target of 2-3% for the majority of last 4 years. Yesterday’s low figures mean the probability of the RBA increasing interest rates in the short to medium term is low. 

 

In addition to this, surveys out of China indicate a slowdown in the performance for the manufacturing and service sectors in October. This comes off the back of President Trump’s tariffs on $250billion worth of Chinese exports into the US. Flow on effects from this slowdown do not provide a great outlook for the AUD. 

 

If you are heading overseas soon, we recommend adding Rate Guard to your foreign currency purchase in store at Travel Money Oz. If the rate changes within 14 days of purchase, we will refund you the difference*, and that difference could mean a few more street hot dogs in New York. Delish. 

 

Consumer Price Index

A widely used economic indicator examining the weighted average price of a basket of consumer goods and service (e.g. food, child care, travel). It is used when calculating inflation and looking at the cost of living.