In times of global uncertainty, commodity-based currencies such as the AUD tend to struggle as investors seek the security of safe haven investments for their funds. As such the AUD has been under pressure of late due to the trade tensions between the US and China, Brexit uncertainty and the downgrade in growth forecasts for the global economy this year.
|Currency Pair||% Change (Month)||Difference on £200,000|
We have seen the AUD’s woes deepen at the beginning of this week, with a steep fall highlighted in Chinese trade activity for last month because of the ongoing trade impasse with the US. The Australian economy and therefore the AUD are heavily reliant on the strength of the Chinese economy and therefore any negative news is likely to have an impact on the value of AUD.
Another factor in the strength of the Aussie has been the Reserve Bank of Australia’s (RBA) decision to cut interest rates to a record low of 1.25% earlier this year, to help boost inflation back up towards 2-3%. Based on comments from members of the RBA earlier this year there are predictions in the media that there could be more rate cuts later this year, which could continue to damage the AUD’s value.
Any clients with an upcoming AUD requirement should keep an eye out for Australian employment data due out in the early hours of Thursday morning. Unemployment has been rising in Australia of late, which was a determining factor in the RBA’s recent rate cut decision, and if this is reflected yet again in May’s figures then the AUD could suffer as a result.
Comments from any RBA members following this data release could give an insight in to whether there could be future monetary policy changes later this year and could therefore have an impact on the AUD’s value.
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