It has been a relatively volatile time for GBPAUD since the beginning of the year when we saw rates above 1.73 where as for the past 6 weeks, they have been hovering in the low-1.76 to mid-1.79 range. The market report looks into the reasons for Aussie strength agains the Pound. The table below shows the range of exchange rates for GBPAUD showing the difference in AUD return you could have achieved when buying £200,000.00 during the past month.
|Currency Pair||% Change||Difference on £200,000|
The best time to buy AUD with GBP may have passed. Indeed, the pairing only came under the 1.80 barrier once between mid-March and mid-May, when it also reached spikes above 1.84 on multiple occasions.
The Aussie Dollar appears to have strengthened; economic data in the UK was hindered by the poor early-year weather, and Brexit becoming a more topical subject.
The resignations of Brexit Secretary Boris Johnson and Foreign Secretary David Davis symbolized the Pound turning a more fragile corner as eyes became fixed on how Theresa May’s white paper would be accepted by wider parliament and the European Union. The speculation has led to Sterling weakness.
More positively for Pound sellers however, is that the Aussie Dollar has been unable to significantly take advantage of Sterling uncertainty. Since July, the Aussie has had reason to strengthen thanks to positive retail data, consumer confidence increasing, and excellent employment data.
However, Australia is a big exporter to China and its economy and currency reflect any change in the situation in that country. It seems the threats of a trade war between the USA and China are not boding well for AUD.
Currently, it seems the 1.75 point is a clear resistance point – in the last six months, anytime GBPAUD has neared this figure, the rate has not stagnated and in fact has risen shortly after. The last time this happened was last week, when after a drop to the low-1.76s, GBPAUD rose to the mid-1.77s.
Yesterday’s positive inflation data did little to GBPAUD rates, which remained unmoved after the release. The next economic data will be released at the end of the night with quarter on quarter import and export data, a slight slowdown is expected.
There does not seem to be much reason to be optimistic for AUD sellers with Westpac reporting a 50% chance of a rate hike by the RBA (Reserve Bank of Australia) by the end of 2019.
I believe that if the Bank of England decide to raise interest rates next week, we could see the pair flirt with the 1.80 mark- something to consider if you are an AUD seller, waiting until this release could be a risky strategy. A rate hike could represent the best chance for Sterling buyers since May.
However, given Brexit, trade war uncertainties and the fact a rate next week is not a given, we could see opportunities for Aussie sellers too. In any case, I would be surprised if the pair left the 1.75-1.80 range in the coming weeks.
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