This Australian Dollar report will address the factors that could have an effect on AUD exchange rates over the coming weeks. The table below looks at the difference between the rate you would have achieved when purchasing £200,000.00 at the low and high levels during the past 30 days.
|Currency Pair||% Change||Difference on £200,000|
The Australian dollar has been under pressure against sterling in recent months due to a surge in sterling and a devaluing Australian dollar due to problems down under. Since the start of September GBPAUD exchange rates have increased in value by 8 cents. To put this into monetary value a £200,000 conversion into Australian dollars now generates our clients an additional 16,000 Australian dollars.
The Australian economy heavily relies on the price of iron ore, as iron ore makes up 16.3% of Australian exports. As the commodity is the largest export, a fall in the price per barrel tends to have a negative impact on the currency.
Australia sell a large proportion of iron ore to China and as construction activity has been slowing in the 2nd largest economy the need for the commodity diminishes. Forecasters are suggesting that in the upcoming months iron ore prices will continue to tumble from current $63 per tonne to approximately $50 per tonne.
In addition another key reason to why the Australian dollar has lost value recently is because of the dovish statements the Reserve Bank of Australia have provided the market. Governor Philip Lowe has insisted that monetary policy will not be changed in the foreseeable future and this was supported by the poor inflation numbers for October.
Globally, central banks are now raising interest rates, which could lead to currency investors selling off their Australian dollar positions to buy other currencies for higher return on investment. If the US hike interest rates in December (87% chance according to forecasters) US interest rates would match Australian interest rates and as the US dollar is a safer currency, I expect a major sell off of Australian dollars which would make the Aussie cheaper to buy.
Tomorrow morning the Reserve Bank of Australia will release their latest monetary policy statement. The statement will give further insight into future monetary policy decisions. I wouldn’t be surprised to see the statement reaffirm that Reserve Bank of Australia have no plans to raise interest rates anytime soon therefore I expect this release to make Australian dollars cheaper to buy.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.