The below report looks at factors such as Brexit and the uplift in the Australian economy, and how they could impact GBPAUD exchange rates over the coming weeks.
Improved confidence on the Australian dollar means GBPAUD exchange rates could have further to fall in the coming weeks. The lack of any interest rate rises in the US helped strengthen the Aussie. With interest rates in Australia at 1.5% and unlikely to be changed anytime soon, the Australian dollar represents a good investment. In a world of ultra-low and even negative interest rates the Australian dollar benefits from being seen as an attractive currency to hold.
The new RBA (Reserve Bank of Australia) Governor Philip Lowe has also been a little more bullish on the economy stating he felt perhaps we have seen a bottoming out of the falls seen in the mining Industry and on the key commodities Australia exports. The new Governor also stated that the interest rate cuts were losing the power in stimulating the economy and helping target a weaker currency.
Combining this more positive outlook on the Australian economy and a desire to avoid cutting interest rates it seems the Australian dollar could well appreciate further against the pound. With limited data this week the Australian dollar may be traded more on sentiment which is what saw it make further gains on the pound last week. Assistant Governor Dr Malcom Edey will give a speech on Wednesday morning with New Home Sales data on Friday.
Continued uncertainty over the Brexit and its long term impact on the UK economy could see the Aussie make further gains and we are very close to retesting the post Brexit lows of 1.68.
Whilst the commentary from the RBA and worries over Brexit lead me to suggest GBPAUD will slide further, nothing is ever plain sailing on exchange rates. Current rates are very close to the best in 3 years for those looking to sell Australian dollars for pounds presenting an excellent opportunity to maximise your exchange.
This weekend has seen the former chief economist of the IMF predicting the slowdown in the Chinese economy is one of the biggest risks facing the global economy. The Australian economy relies heavily on selling its commodities and raw materials to China. Fears over the wobbles experienced in the Chinese economy last year saw the Aussie plunge against all currencies. This Friday’s Chinese PMI (Purchasing Managers Index) data will be read not just for its reflection of what is happening in China, but also for its impact on the Australian and global economy. Any action by the US Federal Reserve to hike interest rates could also trigger selling of the Australian dollar as investors adjust their positions to the potentially longer term, higher yielding US Dollar.
With so many global events available to potentially impact the Australian dollar, clients looking to buy and sell the currency should be aware of all of their options and speaking to their account manager on 01494 725 353 to keep up with the latest trends and themes.
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