Following the global fall in commodity prices including iron ore and coking coal, we have seen the Australian Dollar fall as a commodity based currency. The table below shows the difference in AUD you could have achieved when buying £200,00.00 during the high and low points of the past week.
|Currency Pair||% Change||Difference on £200,000|
Westpac bank have raised concerns that the Australian Dollar will continue to fall this year following a poor start to the year. The strength we saw in the last year was at the time put down to external measures that the Bank of Australia were not in control of and now the unravelling of the currency is not something they can influence.
The release from Westpac suggests global growth forecasts may be too ambitious, especially as PMI (Purchasing Managers Index) data has peaked around the world at the end of 2017 with a gradual reduction in confidence from business managers. Furthermore, the fall in commodity prices of 15-20% since February for iron ore and coking coal, Australia’s main export has been detrimental.
The other main issue for the Aussie is the US Dollar. One key change has been tax reforms in the US have allowed cash rich companies (mainly technology) with huge off shore funds to bring them back at a reduced rate.
This is thought to amount to around $1.5 trillion and central banks around the world including Australia had been using this for funding. However much of that is being returned to US shores and the central bank needs to raise funds from local sources adding to pressures.
In short, several factors have all come together to create something of a perfect storm and over the next few months the Aussie looks set to continue on a negative trend. It should be said that many did see this coming following a significant over valuation in the last year when you considered Australia’s economy.
This week the main focus will be Bank of Australia’s Philip Lowe who will speak in the early hours of Wednesday morning. It will be interesting considering some of the events mentioned earlier what the central Banks Governor thinks are the prospects for the economy and whether he mentions the currency.
Many Australian business’s may find some relief in the currency weakening as their products become cheaper as exporters, whilst Australia’s importers could be about to see prices increase further over the coming year. In the last 30 days anyone completing a £200,000 transfer has gained around $17,000 more for your money. Anyone who is still waiting for the GBP/AUD rate to once again touch the 2.00 level may find themselves in a position to trade in this year.
For more information on how future data releases could affect your currency requirement, call our team of currency brokers on 01494 725 353 or email me here.
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