The Australian Dollar has been on a run against the Pound since the UK's Referendum, but concerns in China and suggestions that the RBA may look to cut interest rates again could weaken AUD.
The missile attacks on Syria last Friday, sent shockwaves throughout the currency markets and commodity currencies including the Australian Dollar devalued. The reason why commodity currencies devalued is because at uncertain times commodity currencies are seen as a risk and investors sell off their positions and purchase ‘safe haven’ currencies such as the US Dollar or Swiss Franc. Looking ahead if further unexpected attacks take place in the upcoming weeks I expect the Australian dollar to continue to lose value.
Many economists including Paul Dales Chief Australian and New Zealand economist for Capital economics are expecting the RBA to cut interest rates in the upcoming months. Forecasters are worried that a slowdown in China is on the horizon, which in turn would reverse the increase we have seen from commodity prices and demand from international investors within the property market would slow. The reason why forecasters believe a slowdown in China is on the horizon is because last year’s monetary stimulus program has now stopped having a positive impact on China and China’s spending spree has seen debt reach a staggering 250% of GDP. Couple this with the US President Donald Trump exclaiming he could charge Chinese imports that reach the US, it looks like the Chinese have a tough couple of years ahead.
Now that UK Prime Minister Theresa May has brought some certainty to the Pound, GBP/AUD exchange rates have improved 3 cents and have drifted away from breaking through into the 1.50s. For those selling Australian Dollars, unless Brexit negotiations break down at the first hurdle, present exchange rates could be the best we are going to see for some time.
For readers that are converting Australian Dollars into Sterling for the first time, if the UK public had not voted out of the EU, exchange rates could have still been close to 2 dollars to 1 pound which means you would receive 35 cents less. To put this into monetary terms on a 400,000 Australian dollar transfer you would have received over £40,000 less.
In other news key data releases to look out for are Unemployment rate and employment change numbers set to be released at 1.30am Thursday.
For more information or news that could impact the Australian Dollar, reach out to our team on 01494 725 353 or email me directly at email@example.com.
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