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 AUD you would have achieved when buying £200,000.00 during the high and low points of the past month.

Currency Pair% ChangeDifference on £200,000
GBPAUD3.9%$13,200
Interest rates remain at 1.5% for the Reserve Bank of Australia

Negative growth forecast and political resignation prompt slump in AUD value

The AUD weakened significantly against the Pound at the end of last week, with political and economic uncertainty weighing heavily on AUD’s value. Firstly, on Friday the Reserve Bank of Australia announced that they had cut their growth forecasts for the end of 2019 by 0.25%, whilst claiming that they don’t believe that inflation will reach the Bank’s target of 2% until the end of that year on the back of fears of a lack in earnings which would in turn reduce consumer spending. A period of low inflation also makes the chances of an interest rate hike far less likely, which could also result in some long-term weakness for the AUD and more opportunities for Aussie buyers.

Could there be a vote of no confidence in Turnbull’s government?

In addition to this, over the weekend Malcolm Turnbull’s coalition government suffered a huge blow following the resignation of one of his lawmakers, John Alexander. Turnbull has recently claimed that anyone holding dual citizenship would not be eligible to sit in Parliament and it has been revealed that Mr Alexander may hold dual citizenship in the UK. This resignation now means that Turnbull’s government no longer holds a majority and this could lead to a vote of no confidence and a general election, and as we know from recent history, general elections have the potential to cause significant volatility on exchange rates.

Any clients looking to buy AUD have seen a huge spike in their favour following these recent events, with a $200,000 purchase now costing almost £1,500 less than it would have done on Thursday last week. In fact, since August a purchase of the same volume could have resulted on a saving of £7,500 if timed correctly.

Thursday looks set to be a key day for the Aussie this week, with employment data and inflation numbers set to be released in the early hours of the morning. With the RBA’s recent cut in growth forecasts on the back of a bleaker outlook for the jobs market, these figures will be looked at with particular interest by investors. The early expectations are for a rise in the rate of unemployment which could heap further pressure on the AUD. This event is outside of trading hours, but the use of a limit order could help you take advantage of any further spikes in the Pound’s value. Contact your account manager here to learn more about how a limit order could work for you.

Thank you for reading today’s Australian Dollar report, I would greatly appreciate any feedback you have and would take pleasure in replying personally. Please feel free to get in touch on 01494 725 353 or email me here.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.