The Australian Dollar could suffer if the US raise interest rates. This report looks at the outlook for AUD exchange rates and what could affect them in the coming days. In the table below you can find the high to low GBP/EUR exchange rate movement and the difference when exchanging £200,000 to Australian Dollars yesterday.
|Currency Pair||% Change||Difference on £200,000|
The Australian dollar is likely to come under further pressure on the back of the recent comments this week from US Fed Chair Jerome Powell. The more hawkish outlook for the time being that interest rates may need to rise faster than expected could have a negative impact on Australian dollar exchange rates. The prospect of four rates rises in the US as opposed to three has a knock on effect on the Aussie. Big changes in the US also impact the Australian dollar due the correlation of interest rates between the two economies. As US interest rates rise faster in the US then funds move away from the commodity currencies such as the Australian dollar. Such action from the Fed could help see the Australian dollar weaken and help push rates for GBP AUD towards the target of 1.80.
Clients with an Australian dollar requirement should watch out for any change of stance from the Reserve Bank of Australia (RBA). Any suggestion that the RBA will look to raise rates could see the dollar bounce back although such commentary to date has not been forthcoming. Chinese Purchasing Managers Index numbers for the manufacturing sector also arrived weaker than expected highlighting an easing in the sector, something that doesn’t bode so well for the Aussie. The performance in the Chinese economy is seen as a good barometer for Australian exports due to the amount that Australia actually exports to China.
Clients looking to buy or sell Australian dollars could see a hugely volatile at the end to the week following the speech from UK Prime Minister Theresa May. A strong speech that is received well could see a material jump higher for the pound against the Aussie. New details over the future path of Brexit are expected to be revealed and with that carries opportunity as well as risk, especially when it comes to Brexit.
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