Over the past few trading days the Australian Dollar has dropped in value after hitting an almost 3-month high against the Pound roughly a week ago.
The uncertainty surrounding the UK’s trading future with the EU has caused a sell-off in the Pound’s value and this has benefited Aussie Dollar sellers planning on buying Pounds. At the same time the Aussie Dollar has been strengthening across the board of major currency pairs recently as the talk of a trade war between the US and China has eased off.
As the Australian economy is tied into China’s in many ways as China is Australia’s main trading partner, we’ve seen the Aussie Dollar benefit as fears of a steep slowdown in China have subsided although the concerns are far from over.
Those of our readers and clients monitoring the Aussie Dollar's value should be aware that the Aussie Dollar could drop if the issue surfaces once again, like we saw earlier this year.
Moving forward I think that if the US Fed Reserve Bank cools its aggressive monetary policy approach we could see the Aussie Dollar benefit, especially if the Reserve Bank of Australia begins hiking rates, although this isn’t expected to happen until the end of summer next year.
AUD has weakened this year as the divergence between the USD and AUD yields are at their widest in the history of the Aussie Dollar. AUD has lost attractiveness to hold funds in as a result which is why it’s been losing value, although the trend has begun to reverse recently for the aforementioned reasons.
There are no major economic data releases out of Australia between now and the end of the week, so I expect Brexit related updates to remain the most influential market movers between the Pound and Aussie Dollar throughout the week.
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