Philip Lowe has raised concerns about a potential economic slowdown in China, as one of the largest importers of foods and services, and a large contributor to the tourist trade this has the potential to have a knock on effect on the Australian economy. The table below shows the difference in Australian Dollars you could have achieved when buying £200,000.00 during the high and low points of the past week.
|Currency Pair||% Change||Difference on £200,000|
Despite a good run of strength for the Australian Dollar in the past week or so we have seen signs of concerns from the RBA over the course of this week, mostly surrounding the Chinese economy.
In a speech earlier in the week Philip Lowe (Governor of the RBA) commented that we cannot expect an interest rate hike in the near future which seemingly minimises the chances of seeing interest rate movements for Australia this year.
Poor construction figures released earlier in the week poured further water on the fire as construction work is actually down by 18% compared to the previous timeframe last year.
Lowe also commented that the recent rise of debt and an increase in bad loans in China is also a worry for Australia, and that similar situations historically have resulted in an economic slowdown or indeed financial crisis.
China is one of the larger importers of coal and iron ore but what also adds a larger concern is that China is the largest importer of Australian foods and services, on top of 25% of all tourist Dollar spent in Australia being from Chinese tourists.
A slowdown for China will not doubt have a large ripple effect on the Australian economy so with this in mind I would not be surprised to see Australian Dollar weakness in the coming months if these concerns gain momentum.
We have another member of the RBA speaking today at 13:00pm but asides from that as we end the trading week much of the movement for the Australian Dollar will be based on risk sentiment and economic announcements elsewhere around the globe.
As we move towards next week economic data from Australia is fairly thin on the ground but one thing that will be closely watched in Chinese manufacturing data on Thursday and Friday as the week nears an end.
A bad figure could lead to Australian Dollar weakness as this would add to the concerns mentioned earlier in this report.
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