Busy Week Ahead as New Australian PM Takes the Reins

Joshua Crafter

The foreign exchange markets look set to enjoy another busy week next week as global political changes and a packed economic calendar both loom large.

On Friday, Australia’s ongoing political woes appeared to end after the Liberal Party voted to replace Malcolm Turnbull as leader and Prime Minister with his colleague Scott Morrison.

Morrison was formerly the country’s Treasurer. The position is largely equivalent to a Finance Minister in other countries. The news that an economically experienced politician will take the reins calmed the AUD markets somewhat towards the end of the week, and on Friday it saw modest rises of around half a percentage point.

Despite being a representative democracy, Australia regularly experiences political upheaval and the identity of the leading politicians often changes on a regular basis. Morrison, for example, will be the nation’s seventh Prime Minister in just over a decade.

As a result, the AUD in recent years has become somewhat immune to politics, and changes usually never have much effect on the value of its currency. However, that has changed this time. Prior to the resolution of the most recent political crisis, the value of the AUD slid by over 1%.

AUD traders, will be hoping that the appointment of Morrison will herald a somewhat steadier week for the country and for the currency.

While this leadership election was just for Liberal Party MPs, Australia’s next country-wide general election is due to take place in 2019 or before – meaning that another test of the AUD’s strength against political problems could be just around the corner.

Morrison, known in political circles as “ScoMo”, will spend next week coming to grips with his new job. However, there’s a lot more going on around the world as the forex markets head into next week.

The Summer Bank Holiday takes place in the UK on Monday, meaning there may be some sluggishness on the cards for the GBP.

That will be more than made up for by the rest of Monday’s activity. The IFO business index will be out in Germany at 08:00 GMT, and it will cover everything from the business climate there to business condition expectations for the future.

Eyes will remain on Germany on Tuesday as the country’s import price index for July will be revealed. Over in Italy, the August business and consumer confidence surveys for August will be released at 08:00 GMT, with its producer price index for July following at 09:00.

Wednesday sees the reveal of British house price data for August at 06:00, while the theme will continue around the world as Australian new home sales data for July will also be released.

The big event on Wednesday will be the release of US GDP figures for the second quarter of the year. Some analysts expect a rise of around 0.1%.

If a rise occurs, it’s likely to fuel speculation that the Federal Reserve will use this development to support plans for a hike in interest rates – or possibly even two – later this year.

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Joshua Crafter
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