Since the beginning of the month, the GBP has seen steady gains against the AUD, with mid-markets levels for the pairing appearing to have found support above 1.80.
|Currency Pair||% Change (Month)||Difference on £200,000|
GBP/AUD rates had previously weakened from what were 2 year highs for the pairing back in May, following the announcement that the current UK Prime Minister was set to resign, which fuelled reports that a potential ‘no-deal’ separation from the EU was seemingly back on the cards, which has typically seen the GBP weaken.
However, since the RBA’s decision to cut interest rates to historical lows of 1.25% at the beginning of the month, the AUD has weakened against most major currencies and with suggestions that further cuts could be on the cards, this could influence further weakening of the currency.
Investor attention this week will undoubtably be focussed on the speech from the Reserve Bank’s governor Philip Lowe and any sense of a dovish tone could then see further Aussie weakness.
The Australian economy is growing at its slowest rate in almost 10 years and consumer spending has dropped, which has fuelled speculation surrounding how long the country will sustain its run of over 27 years without a recession.
Despite this, the price of the countries main export iron ore, has reached the highest levels since April 2014, with the driving prices fuelled by concerns over global supply and enduring demand from its key trade partner, China.
However, even with this growing demand the currency has remained vulnerable and has weakened against most major currencies since the start of the year.
This movement has been largely influenced by the growing political and economic pressure the United States has placed on China, which has seen retaliatory trade tariffs imposed by both parties on imported goods.
This has in turn affected the sentiment of riskier currencies such as the Australian dollar and lead investors to move their assets to safe havens such as the US dollar.
With pressure growing on AUD currency markets, clients with an upcoming requirement should get in touch with their account manager to help manager their market exposure.
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