The Australian dollar extends its gains from the end of last week by 0.5%, remaining the strongest among G10 currencies, despite the recent stabilization of the U.S. dollar. In addition to the overall decline in confidence toward the USD, the AUD/USD exchange rate was further supported by the historic victory of the Australian Labor Party in Saturday’s parliamentary elections.
Prime Minister Anthony Albanese’s party secured an outright majority in Parliament for the second consecutive term, while also taking several seats from the conservative NLP. Peter Dutton, the NLP leader, lost his own seat, mirroring the fate of Canadian Conservative leader Pierre Poilievre.
The basis for the Australian Labor Party’s victory is essentially similar to the resurgence of the Liberals in Canada. Despite the growing popularity of the reactionary NLP, fears over Donald Trump’s influence on Australia’s geopolitical and economic situation renewed enthusiasm for Albanese’s party, which voters perceive as a safe pair of hands in times of extreme uncertainty.
Beyond increased market trust in the current government, sentiment toward the Australian dollar may further improve due to the normalization of trade relations between China and the U.S. The AUD/USD rate is highly dependent on exports of industrial materials to China, so reduced risk of a trade war and an economic slowdown in China could lead to further appreciation of the currency.
The exchange rate has broken firmly above 0.64 mark, which could serve as a support amid newly developing macroeconomic and geopolitical fundamentals. Source: xStation5
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