The Assistant Governor of the RBA is due to speak overnight and will address interest rates and the current economy, which could cause AUD weakness if the concerns over wage growth come up again. The table below shows the difference in AUD you could have achieved when buying £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
Last week saw the pound find some favour against a range bound Australian dollar, allowing a move above the 1.80 level which has evaded us since before the UK vote in June 2016. The Australian dollar has been gently weakening as the prospects of any interest rate hikes in Australia continue to remain unlikely in the foreseeable future.
Early tomorrow morning is the latest RBA (Reserve Bank of Australia) Minutes, this is not expected to be much of a market mover since the interest rate decision 2 weeks ago outlined the current neutrality of the RBA.
What might be more interesting overnight is Assistant Governor Bullock’s speech on the economy and interest rates. Recently she has highlighted concerns in wage growth, if anything comes from this it might be some further AUD weakness.
Most importantly this week on the Australian side is Thursday’s Australian unemployment decision, this is a key factor for the RBA to take into consideration over future interest rate hikes. If the news is good it might bring forward the interest rate likelihood slightly, but there could be more important events this week to move the Australian dollar.
Overseas news is always important on the Australian dollar and the GBPAUD rate. One of the key reasons for the Aussie to have weakened so much in recent years is the stronger US dollar. As US interest rates could rise this week, the arguments for holding the Australian dollar begin to diminish.
Investors hold the Australian dollar to benefit from the higher interest rates which gives them a greater return on their investment. As US interest rates rise, this trade loses value since the US dollar is preferable owing to its more dominant status.
The US might raise interest rates on Thursday and raise their interest rate forecast too, a stronger US dollar is likely and this would see the Aussie losing further ground.
The pound could be in for a good week with potential to rise on key news from the Bank of England and also the EU Summit. Assuming the news from the UK is all positive and the US are positive too in their progress on interest rates, GBPAUD could easily find itself pushing even further into fresh highs.
If you are selling AUD then some form of exit plans seems sensible as the trend currently in place seems likely to continue as the US Fed and Bank of England continue on a path to raise interest rates, whilst the RBA adopt a more cautious path.
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.
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