With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The below table shows the difference in Australian Dollars you would have achieved when buying £200,000 during the high and low levels in the past week.
|Currency Pair||% Change||Difference on £200,000|
The Australian dollar has been gently rising in strength against its peers partly due to continued economic strength in Australia and rising commodity prices. Uncertainty too over the likelihood of US interest rate hikes had benefitted the Aussie as investors invested in the high yielding Australian dollar.
However with reports of a ballistic missile being fired over Japan the Aussie has lost almost two cents against the pound. It appears the reason is game playing by the volatile North Korean leadership in response to military exercises by the South Koreans and the US.
With the strength and weakness of the Australian dollar closely linked to trade and political relations in the Asian region, this news has spooked investors. Interestingly before the launch the Aussie was gaining and should this threat from Pyongyang fade (as they have recently) the Aussie should continue to hold value. This brief spike might well be worth capitalising on for any buyers of Australian dollars holding pounds.
Strong trade with China and domestic events in Australia like the prospect of interest hikes down the line have all been helping the Australian dollar to rise against the ever weaker pound. With the base rate at 1.5% versus some of the near zero or even negative interest rates offered by other currencies the AUD is used by investors to capitalise on the higher returns.
Such a feature of the Australian dollar makes it a volatile currency for investors to hold but with current conditions seeming to support a continuation of the trend and sterling weak, a move below 1.60 does seem likely.
This week is fairly light on economic data from Australia but look out for some Construction data in the early hours of tomorrow morning plus New Home Sales on Thursday morning. With the performance of the Australian dollar closely linked to global events such as the US dollar and North Korean tensions, the GBPAUD rate will more than likely take its cues from events elsewhere.
A move below 1.60 this week seems unlikely but should the North Korean situation quieten down and the US dollar remains weak we could get close once again.
If you have a transfer buying or selling the Australian dollar this week could see some unexpected movements from global events so please make sure you have spoken to your account manager so we can keep you informed.
Thank you for reading today’s market report, if you have any questions about an upcoming transfer I would be happy to assist you. Please feel free to get in touch on 01494 725 353 or email me here.
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