The Aussie dollar has made a dramatic about turn, as investors chose to back the currency against changes in sentiment. There are a series of events which have helped the Aussie to rise in value, as the market sees more reasons for optimism than negativity.
|Currency Pair||% Change (Month)||Difference on £200,000|
A clear factor is that last week, there were no further interest rate cuts, with the RBA (Reserve Bank of Australia), looking to embrace a slightly less negative outlook. By not overly committing to further cuts as well, much of the recent weakness in the currency has evaporated.
Whilst interest rates are at historic lows, and there is a strong likelihood there is a potential cut coming in the future, the Aussie has maintained form for it not being quite as bad as many had predicted.
Also, the G20 summit saw more optimism on the trade wars with Trump and China not increasing their tariffs, as many had expected. All in all, the Australian dollar has had a series of more positive pieces of news which has increased its value. However, with a cut expected and the potential problem of trade wars down the line, we could easily see the Aussie weaken again.
The pound to Australian Dollar interbank rate has dropped to the lowest in 4 months which may be positive news for those selling Australian Dollars. Continued uncertainty over Brexit, and a recent upturn in sentiment as explained above, has caused the pound to suffer further against the Australian currency.
With the pound expected to remain weak as investors continue to struggle to price in the value of Brexit, and also continued concern regarding recent poor UK economic data, the Aussie might well retain some of its strength against the pound.
The Conservative leadership campaign could be a key event pending with the potential to move the market, investors are eagerly awaiting to see who the next UK Prime Minister will be. It appears a Boris win is most likely, it has been suggested that much of the news on this is already priced into current values for the pound.
This week there is some UK Industrial and Manufacturing data that may cause movement for the pound, due tomorrow at 09.30 am. Aside from that, investors may wish to monitor ongoing comments from the RBA and either Boris or Jeremy Hunt, to provide insight into which direction events will be taking on GBP/AUD levels.
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