The Australian Dollar has found renewed support after a rise in commodity prices which have climbed more than 2% in recent days largely as a result of price rises in iron ore and oil. A rise in commodity prices generally helps boost the Australian Dollar.
The strong comments from two Federal Reserve speakers in the US this week also suggest a better global outlook which appears to supporting the Aussie further.
All of this news is being reflected in Australia’s stock markets where share prices have increased rapidly this week whilst almost touching a two-year high.
The Reserve Bank of Australia (RBA) meet on Tuesday for the next interest rate decision where rates are expected to remain on hold at 1.5%. There is unlikely to be any change considering recent comments from RBA Governor Glenn Stevens highlighted concerns over an appreciating exchange rate.
A rate increase would almost certainly see the Australian Dollar strengthen which the central bank wishes to avoid and so rates are likely to remain low for the foreseeable future.
Data is light in Australia as we end the week so focus now shifts to that interest rate decision and a raft of other economic data next week.
Retail sales numbers and building permits are both released on Monday and are both good barometers as to the performance of the two sectors.
GBP/AUD will continue to be heavily impacted by political developments in the UK and EU in these coming days and weeks now that Article 50 has been invoked. One of the first hurdles in the Brexit negotiations will be whether the British exit bill and future trade agreement will be discussed simultaneously or separately, something the British and EU are already not in agreement on.
The wording in the EU response will be paramount as it will highlight if there is any room to negotiate on this point and the markets are likely to react accordingly. A tough official stance from the EU could be damaging for the pound and rates for GBP/AUD could easily fall back below 1.60 in this scenario.
For more information or future forecasts around AUD exchange rates, call our trading floor on 01494 725 353 or feel free to email me here.
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