The Australian Dollar snapped a five-days long sell-off on Monday after a surprise win for Scott Morrison in elections over the weekend.
The country's ruling Liberal-National coalition headed Prime Minister Scott Morrison managed to stay at the helm in what is considered to be a miracle victory as Labor party had been widely expected to win. The shock produced by the election results is comparable to Brexit referendum outcome and Donald Trump's victory in 2016, no wonder that the market reacted strongly to the news.
The Aussie started the week with a bullish gap and jumped as much as 1% to trade at $0.6925 at the time of writing. The change of power is often associated with a period of uncertainty, while the retention of the current government allows expecting stability and consistency of the economic policy. Moreover, the market bets on increased spending promised by the Liberal-National coalition during the election campaign. Though the amount of stimulus is smaller than that proposed by the opposition, it is sure to reinforce the economy that has been losing momentum recently.
However, the AUD/USD stellar growth may prove to be temporary. The tensions between the US and China and growing expectations of the rate cut by the RBA are the headwinds that pushed the currency lower during the previous week, and they are likely to return to the fore as soon as once the first reaction to the election results is over.