It was a positive start to 2015 for the Australian share market, with the All Ordinaries Index increasing by 3.0% in January to close at 5,551.6 points. The positive result came despite fresh Eurozone debt concerns following the Greece election result.
Global shares were once again mixed in January, with the US Dow Jones Index falling 3.7%, the London FTSE gaining 2.8%, the Hong Kong Hang Seng Index gaining 3.8% and the Japan Nikkei 225 Index gaining 3.8%. While US shares fell in the month, a positive return was generated on an "Australian Dollar equivalent basis".
The chart below shows the performance of the Australia Dollar relative to the US Dollar over the last year.
As noted in the above chart, in January alone, the Australian Dollar declined by nearly 5%! A lower dollar will help domestic retail, key exporters, the manufacturing industry (albeit that this is an industry in decline) and the agricultural sector. For the consumer, a weaker Australian Dollar is not necessarily a good thing.
A falling Australian Dollar will also be relief for the RBA board members (who have previously stated concerns over the strength of the dollar). The RBA board meets tomorrow with support for a cut to the Target Cash Rate gaining some momentum. However, my prediction is that rates will remain on hold at 2.50% per annum come 3PM tomorrow.
It would be remiss to not mention the result of the Greek elections held in the month...
The election resulted in a new “anti-austerity” Government being elected, the Syriza party. The Syriza party has pledged to try to get some of Greece's debt “written off” and roll back unpopular austerity measures, even if they potentially jeopardise Greece's place in the Eurozone.
We will watch this space to see what develops, however investment markets around the world seem unfazed so far.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.