How will US Interest Rates effect AUD

The Australian economy and therefore the Australian Dollar has been performing well so far this year, in fact it is one of the best performing currencies of 2017. Last week saw the release of employment data which showed a lower rate of unemployment, and it has gained by over 5% against Sterling since the start of the year. However, this positive run could be coming to an end if the US decide to raise interest rates at their next meeting in March.

Tomorrow evening at 7pm the Federal Reserve will release minutes from their last meeting in January and it is expected that they will further hint towards raising rates sooner rather than later.

The Australian Dollar has seen an influx of investors looking to take advantage of the higher than average 1.5% return on investment, however those investors would likely move their funds into the safer USD should US Interest Rates become more attractive.

RBA minutes from February and interest rate decision

Overnight the Reserve Bank of Australia released minutes following from their last Interest Rate decision meeting on 7th February, where they kept rates on hold at 1.5%. The main topic taken into consideration for the RBA when holding rates was a worse than expected decline by 0.5% in GDP, which was put down to poor weather conditions and unsteady coal supply in the last quarter of 2016. They said that Growth within Australia’s major trading partners had been far more positive over recent months and that higher prices of oil should begin to feed through into Inflation this year.

The minutes provided very little insight into the RBA’s next moves, however the bearish tone caused the Australian Dollar to weaken against the Pound and Dollar.

This evening RBA Governor Philip Lowe will be making a speech in Sydney which could create further AUD volatility. Looking at the week ahead the main economic catalyst for GBP/AUD rate movements will likely be UK Growth figures tomorrow morning, where any fall from the previous reading of 0.6% could create another opportunity for Australian Dollar sellers to take advantage of.

Call us on 01494 725 353 or email me at to take advantage of AUD strength against the Pound.


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