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Check inflation before you travel

November 5, 2018 Financial No Comments Email Email

Travel Money Oz is encouraging travellers to pay attention to inflation in order to get the best bang for their buck when exchanging currency.

Travel Money Group General Manager Kelly Spencer said this week’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.

 “This highlights the need for travellers to pay attention to inflation when planning the foreign currency for their next trip,’’ Ms Spencer said.

“Inflation shows the cost living 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. This week’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.

During October, the AUD traded in a two cent range against the US, 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,’’ Ms Spencer said.

Exchanging the same amount at the low of 0.7070 left your pocket $32 lighter, with only $1414USD.  Considering $32 equates to two NY t-shirts and a classic hot dog from a street vendor, a rate of 0.7230 is a day’s lunch and souvenirs for your parents sorted,’’ she said.

Travel Money Oz says American politics will be a major focus 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,’’ Ms Spencer said.

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