GBP/ AUD rates have continued on their upward trend during the early part of the trading week, with the pair hitting a fresh three week high overnight.
The Pound has benefitted from an improved run of data and increased investor confidence, whilst the AUD is coming under pressure ahead of this month’s prospective interest rate hike by the US FED.
The Australian Dollar is a commodity based currency due to its heavy reliance on exports, in particular its raw materials to China. The likely rate hike will mean that investor’s pull their funds away from the riskier based currencies, such as the AUD and back into the US Dollar. This in turn will then weaken the currency in question and the AUD could come under further pressure against GBP. This theory is reliant on the current Supreme Court hearing in the UK and the on-going uncertainty surrounding how we will facilitate our Brexit not derailing the Pound further but now may be the time for those clients holding the AUD to consider their positions ahead of a busy month in the lead up to Christmas.
We also need to consider that Donald Trump’s verbal attacks on China are hardly likely to breed confidence in the region. They are Australia’s largest trade partners, so further pressure could be heaped on the Australian economy due to a potential slowdown in the Chinese economy and ultimately their demand for Australia’s raw materials.
As expected the Reserve Bank of Australia (RBA) decided to keep interest rates on hold overnight at 1.5%, which had been priced into the current market. The subsequent statement was fairly positive but with a word of warning against the on-going global unrest, caused by outside factors such a potential slowdown in the Eurozone economy, which would have a negative knock on effect globally.
They also left themselves open to a further interest rate cut if necessary, although they did not feel this was necessary under current market conditions.
There is another key data release overnight with their latest Gross Domestic Product (GDP) figures being released. These are always a good gauge for any investor looking into the relative health of a countries economy, as it gives us an insight into their current economic status and future growth prospects.
Finally on Thursday we have import/export data and this is also an important release for the Australian economy in particular, due to their heavy reliance on this sector of the economy.
The Australian Dollar could weaken as we approach the FEDs interest rate decision next week. Clients looking to buy the Australian Dollar could benefit from getting in touch with their dedicated broker ahead of the decision. Call us on 01494 725 353 or email me here if you havent signed up to our service yet.
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