GBP/AUD rates seem to have settled around 1.76 over the past 48 hours, following some heavy losses earlier in the week for the AUD. The Australian Dollar report below looks into the reasons for these losses as a commodity based currency. The table below shows the range of exchange rates for GBPAUD for the past month, showing the difference in AUD you could have achieved in return when selling £200,000.00.
|Currency Pair||% Change||Difference on £200,000|
It was only a few days ago that the AUD had dipped below 1.73, with deep-rooted concerns over Brexit and the current stagnation in negotiations, threatening to force Sterling’s value down even further.
A move back towards 1.70 seemed like a distinct possibility, with the markets seemingly viewing the slow-down in global trade and the potential destabilisation of the AUD, as the lesser of two evils when comparing it to the current woes facing the UK economy.
However, as often happens the currency markets never fail to surprise us and a shift in market perception has caused the AUD’s value to dip, with Sterling benefitting as a result.
The Pound has risen by over three cents in the past week, which in monetary terms has provided those clients shifting £200,000 with an extra $6000 AUD.
The key question we should be asking now is why the sudden turnaround?
Whilst there will be numerous external factors affecting GBP/AUD rates, it is likely that the current economic crisis in Tukey and a slowdown in Chinese Industrial Production, is having a significant impact on investors risk appetite for the AUD.
The AUD and other commodity-based currencies have seen their value dip, ever since the Turkish economic crisis deepened towards the later part of last week.
The Turkish Lira (TYR) has hit record lows against the USD, with inflation levels in Turkey hitting a staggering figure of 15%. The Turkish stock market has fallen by over 17%, causing investors to panic, whilst also sapping their risk appetite.
When the global markets stutter and investors risk appetite falls, commodity-based currencies generally feel the negative effects first. These currencies are considered riskier assets by investors, which are generally sold-off in times of global market uncertainty.
Another negative for the AUD is the recent slowdown in Chinese Industrial Production. President Trump’s trade tariffs on Chinese Steel & Aluminium have started to impact Chinese production, which in turn has slowed their demand for Australia’s exports of raw materials.
Australia’s GDP consists of around 30% from Chinese exports. This means that they have a huge reliance on Chinese economic growth, which means any slowdown is likely to hit the Australian economy and ultimately the value of the AUD.
With Brexit talks coming back into focus sooner rather than later, it may be that those clients holding GBP have found an unexpected window of opportunity to purchase their AUD.
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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