The pound has hit the highest rate we have seen against the Australian dollar in 2 weeks after the news that Europe is softening its approach to Brexit.
The real stumbling block for months has been that of the Irish backstop, and yesterday French President Emmanuel Macron suggested that they may open to renegotiating the EU Withdrawal Bill. This saw the pound hit 1.8155 on the Interbank level providing some much better news for anyone looking to buy Australian dollars at the moment.
During yesterday’s trading session the Commonwealth Bank of Australia (CBA) announced that they do not expect the currency to improve towards the end of this year. One of the reasons given was that the Australian dollar has continued to be negatively effected by on ongoing US-China trade war.
US President Donald Trump has threatened to apply a 10% tariff to all China’s exports to the US which may come into effect by the 15th of December. If this does happen this could cause a problem for the Australian dollar as China is its largest trading partner.
The CBA has suggested that the Chinese currency will be weakening in light of the trade war issue. This in turn was one of the reasons given by the CBA that AUD could underperform towards the end of the year.
Head of Foreign Exchange strategy at CBA, Richard Grace has claimed ‘the Chinese economy is now growing at a slower rate because of a slowing in the domestic economy, and because of the impact of US tariffs on exports to the US.’
The Reserve Bank of Australia (RBA) has also cut interest rates twice during this year.With global investors having previously been attracted by a strong yield, many are being discouraged from investing in the Australian dollar which has caused the currency to weaken. Demand for raw materials, of which Australia is a huge producer, is also weakening in China which is another reason for the weakness in the Australian dollar.
As we come to the end of the month there is little economic data due out from Australia, so all eyes will remain focused on what is happening with Brexit. To keep informed about the factors that could influence an upcoming currency exchange, feel free to get in touch with the team here at Foreign Currency Direct.
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