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Australian dollar got off to a rocky start

The Australian dollar was unsettled on Monday on increased political uncertainty, while diminishing concerns over Brexit lent support to the British pound and the other major currencies.

Sterling rose to 1.3302 against the dollar, stabilizing after the 11% plunge a week ago in the wake of the U.K.’s vote to leave the EU.
 
In Australia, the country’s general election on Saturday declared no clear winner after more than two-thirds of the votes were counted. As a result, the Aussie fell to 0.7410 in the early trade from 0.7495 late on Friday. It has since recovered to 0.7515.

Investors await Tuesday’s Reserve Bank of Australia’s monetary policy decision.  Economists expect the central bank to keep the cash rate unchanged at a record low of 1.75%. However, there are some expectations that the RBA could re-establish a clear easing bias, something that could keep the Australian dollar under the pump.

For the other major currencies, the impact of Brexit is starting to fade on promises of more stimulus from the Bank of England and on discussions around UK corporate tax cuts to offset the implications of leaving the European Union.

Brexit’s clear outcome is that market participants no longer anticipate the Fed to raise rates this year, while other central banks are seen ready to ease monetary policy even further.
 
The single currency was little changed at 1.1130 against the dollar from 1.1139 on Friday, while standing at 114.31 against the yen. The greenback was steady at 102.62 against the yen.

Several investors argue that the impact of Brexit could take longer to appear given nothing solid has been set after the referendum, such as when and how that will take place.

With U.S. markets closed for the Independence Day, trading is expected to be subdued on the day, while market watchers will be shifting their attention from Brexit-related news towards the June non-farm payrolls report and FOMC meeting minutes. 


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