Dayle Littlejohn
Senior Executive Dealer
Mixed messages from the RBA
The AUD has been increasing in strength over the pas few weeks, rising by 11 cents since the beginning of June. But what is the long term outlook for AUD?
This Australian Dollar report will address the factors that are likely to affect exchange rates in the short term if you are buying abroad or making a currency transfer. The table below shows the difference in Aussie Dollars you would have achieved when buying £200,000 during the high and low points of the past 30 days.
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBP/AUD | 5.05% | AUD $16,480 |
A warning from the RBA earlier in the week
In recent weeks the Australian dollar has strengthened significantly against all of the major currencies. Since the start of 2017 the Australian dollar is the fourth best performing currency out of the top 10 most traded currencies and is 10.2% stronger than 8 months ago.
Earlier this week the Governor of the Reserve Bank of Australia Philip Lowe warned that the overvalued Australian dollar could start to have a negative impact on GDP growth, inflation and jobs might be at risk. Like any central bank their purpose is to improve growth and low inflation levels, and an overvalued Australian dollar stops this from happening.
An option the Reserve Bank of Australia have is to cut interest rates which would stop flows of currency landing on Australian dollar shores due to the high interest rates and currency investors could move their assets elsewhere.
However I expect the RBA to keep interest rates on hold and for influential figures such as the Governor Philip Lowe to use jawbone techniques to try and talk down the currency. Overall I expect the strong run of Australian dollar strength to come to end very soon.
RBA optimistic after downgrading GDP
In the early hours of this morning the Reserve Bank of Australia released their latest monetary policy statement. The central bank cut growth forecasts up until the end of the year to 2-3% from 2.5-3.5%. However the central bank is optimistic and confident that economic growth would recover as long as the currency did not continue to strengthen. The statement also indicated that the RBA didn’t expect unemployment or wage growth to improve much.
For clients that are selling Australian dollars to buy pounds, exchange rates have improved 10 cents since the start of June and with such an uncertain time ahead this spike in the market may be worth taking advantage of.
Thank you for reading today’s Australian Dollar report, if you have any questions about an upcoming transfer I would be more than happy to assist. Please feel free to get in touch on 01494 725 353 or email me here.
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