Good News: AUD/USD Rallies to its Highest Since March 2018

3 min read | January 07, 2021 03:41 PM AEDT | By Kunal Sawhney

Good News: AUD/USD Rallies to its Highest Since March 2018

Reasons

Today’s news came after the Georgia Senate elections led to downward pressure on USD and the iron ore prices have continued to rally up to USD 168 a tonne.
Another positive motivator for the AUD is the continued number increase of the services PMI for the country, which has kept the AUD value up in the market.

INTERESTING READ: Three currency pairs gaining ground, what are chartists looking at in 2021?

Georgia Senate Elections and the Effect

Democrats managed to sweep both seats in Georgia’s runoff elections. This highly critical win allows the party control of the Senate. The election results were in line with the forecasts. However, the win of the democrats was perceived as a red flag in the FX markets.

Democrat Jon Ossoff beat Republican David Perdue and in the other seat Democrat Raphael Warnock defeated Republican Sen, Kelly Loeffler. This significant win means that the Democrats now have control over both chambers of Congress.

It is expected that Joe Biden would utilise this win to increase taxes on the wealthy and companies. He is also likely to increase the stimulus given to households and is expected to boost regulations. This win allows him a say in the judicial nominations as well.

An increase in foreign direct investment to the US could help the USD maintain strength in the current scenario. However, an expected increase in inflation might alter the course taken by the American Dollar.

ALSO READ: AUD rises as job data lifts FX traders

FX changes in the Backdrop of These Announcements

The developments have strengthened the Australian dollar against the USD. The Australian dollar gained momentum in the market as AUD/USD rose by 0.51% post the announcement of the Senate election results.

AUD/USD has rallied by 36% since its lowest dip in March 2020. FX rates have remained volatile; however, an upward trend is apparent over the course of 9 months post March. (SOURCE:)

The AUD/USD pair is also reacting to the PMI data released for Australia on the 6^th of January. Markit Economics has reported a PMI increase from 55.1 in November to 57.0 in December.

The AUD/USD pair is expected to continue its rally and rise in the near future as well.

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