This currency update examines the factors that have the potential to effect your Australian Dollar exchange over the coming weeks. The below table displays the difference in AUD you would have achieved when buying £200,000 for this year to date.
|Currency Pair||% Change||Difference on £200,000|
The Pound put in another strong performance against the Australian Dollar yesterday, as Sterling’s recovery against the commodity currencies continues.
Despite the Pound coming under pressure after Theresa May’s no show on Wednesday and the election polls indicating that there could be a Hung Parliament during next week’s election, the Pound is still gaining on AUD after consolidating above the key 1.70 benchmark.
This leads me to believe that Aussie Dollar weakness is more likely the driving force between GBPAUD price movements as the Pound has been under performing against a number of major currency pairs in recent weeks.
The slowdown within China’s economy is likely to be the main reason behind recent Aussie Dollar weakness, and it appears to have accelerated since Moody’s (a credit rating business) downgraded China’s economy for the first time since 1989 last month.
With China and Australia being such close trading partners I can understand why investors would be spooked by this news, and AUD hasn’t been helped by the headlines surrounding the weakening of commodity prices globally as Australia’s economy has a high export bias.
I also think that AUD could be considered overvalued by some, as Australia has offered one of the highest yields on deposits within the developed world for some time. Now that the likes of the Fed Reserve Bank in the US are hiking rates the Aussie Dollar could find itself in less demand, which would cause weakness for the currency as funds are moved out of AUD and into other currencies.
There’s no major economic announcements out today in Australia, so clients will have to look to next week’s interest rate decision for the next potential big market mover.
Feel free to get to touch if you would like to plan around this trade, as Limit Orders can be a way to capitalise on short term price movements outside of market hours.
For more information on how future data releases could affect your Australian Dollar requirement, feel free to get in touch here.
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