This currency update examines the factors that have the potential to effect your Australian Dollar exchange over the coming weeks.The below table shows the different in Australian Dollar you would have achieved when buying £200,000.

Currency Pair% ChangeDifference on £200,000
GBP/AUD7.2%AUD 25,200

Could the Australian Dollar weaken in the near future?

Over the last two months the Pound has made gains vs the Australian Dollar of over 15 cents which in monetary terms is the difference of £10,700 on a currency transfer of AUD$200,000. The American economy has displayed signs of a slowdown in GDP but the real problem longer term as far as I’m concerned is that of China.

China is Australia’s biggest trading partner and this week we have seen the credit ratings agency Moody’s cut China’s credit ratings for the first time since 1989. The downgrade could mean increasing borrowing costs for the Chinese government and the outlook for China has been changed from stable to negative.

The Chinese economy grew by 6.7% last year compared to 6.9% in 2015 and this was the slowest growth seen in 26 years. Compared to any of the western economies this GDP figure is impressive but the concern is that it is falling. As China is the second largest economy in the world this could cause huge problems in the future. One positive to take is that although Chinese debt currently stands at 260% of GDP most of the debt is owned by the state rather than private companies. However, in the long term I think we’ll see the Australian Dollar struggle if the Chinese economy continues to slowdown.

Australian Growth Forecast

On June 7th Australian GDP figures are due to be released and this could match Holland’s record 103 quarters without recession. National Australia Bank has predicted that we may see ‘flat or negative growth.’ If this happens this could see the Australian Dollar weaken but as it is released the day before the UK goes to the polls it will be interesting to see what effect this has on GBPAUD exchange rates.

There is clearly a problem in Australia with an over inflated property market in Sydney & Melbourne and the Reserve Bank of Australia are currently in a difficult position. If growth does slow down this would encourage the RBA to cut interest rates in an attempt to stimulate the economy but if they do this could cause further problems for the housing market.

With the bank holiday looming on Monday if you have a requirement to buy or sell Australian Dollars it may be worth placing a Limit Order which means that when the market moves to your specified rate, our system automatically purchases your currency, letting us work as your eyes and ears in the market.

Thank you for reading today’s market report, I would greatly appreciate any feedback you have and would take pleasure in replying personally. Please feel free to e-mail me here.

The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.