The RBA have talked down the likelihood of further interest rate hikes in the short term which has caused the Australian Dollar to weaken, as interest rates are set to rise for a number of other currencies. The table below shows the difference in USD you could have achieved when buying £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
GBP/AUD rates have dropped back below 1.78, following a slight rally by the AUD during the early part of the trading week.
The AUD continues to find plenty of support below 1.80 but has thus far failed to make a sustained impact back towards 1.75 in recent weeks.
The Pound rallied last week as discussed earlier in this report and despite seeing some of these gains eliminated, continues to hold its position against the commodity based currencies, better than it has against both the EUR & USD.
The Pound hit a high of 1.7905 before retracting to the current levels, which in my opinion still offer very attractive buying opportunities when you consider the recent history on the pair. In fact, looking closer and GBP/AUD rates are currently trading at some of the best levels since the now infamous UK referendum result.
Whilst 1.80 continues to offer some resistance and is now looking like a key resistance level, the AUD has been handicapped by a number of economic variables.
The Reserve Bank of Australia (RBA) has often been considered to have a rather optimistic outlook, on both the Australian and global economies. Its early year growth forecast for both are testament to this but in fact looking back over recent years, they have rarely reached the central banks predicated levels.
It may be that investors are paying less and less attention to these bullish predictions and looking more closely and the tangible variables that will actually influence the economy and ultimately the value of the AUD.
It most likely has its own agenda when setting these forecasts, as the Australian economy is heavily reliant on global growth and its trade exports to flourish.
On-going concerns over rising property prices in some of Australia’s most affluent suburbs, coupled with a slow in demand last month from China its largest trading partner, have certainly handicapped any major advances for the AUD so far this year.
Despite the RBA’s optimism, even they talked down a prospective interest rate hike in the short-term during their last policy meeting, news which again has dampened investors risk appetite in the AUD.
However, perhaps the most important element of the AUD’s current malaise is when we consider the recent performance of the US economy and short-term outlook for the global markets.
The US economy is still considered the key driver of the global markets and as such any upturn in the US economy can lead to an increase in investors risk appetite. This in turn will cause investors to move their funds in to what are considered riskier currencies such as the AUD. Therefore, in times of global prosperity the AUD will often strengthen, as investors look for potentially higher yielding currency returns. Similarly, in times of global uncertainty as we currently face, funds are moved away from the riskier assets and into safer haven currencies such as the USD, thus causing currencies like the AUD to weaken.
Whilst there are many facets to any currency fluctuation, the current uncertainty surrounding Brexit and trepidation of investors towards current global economic growth, may help to support GBP/AUD rates around the current levels.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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