With the US Fed planning as many as 4 interest rate hikes in this year, the Aussie Dollar could struggle as the RBA await signs of wage growth before making any change. This Australian Dollar report discusses how interest rate hikes, both internal and external could affect AUD in the coming months. The below table shows the difference in AUD you could have achieved when buying £200,000.00 during the high and low trading points of the past month.
|Currency Pair||% Change||Difference on £200,000|
A very busy week of news that could shift Australian Dollar exchange rates kicked off last night with the RBA (Reserve Bank of Australia) interest rate decision. Leaving interest rates on hold as expected failed to see much change in the GBPAUD price, the main comment to take from the Rate Statement is that the RBA are waiting for improved wage growth before they commit to raising rates.
We also had Retail Sales which is an important factor for the RBA. Sluggish Retail Sales at 0.1% growth will not have laid any kind of foundation for the long-awaited interest rate hikes markets have been speculating on for Australia.
As the RBA remain some distance from raising interest rates the Aussie is weaker compared to its strength last year when markets felt a hike was coming soon. For now, Australian Dollar buyers and sellers should be planning when and where to time a move to maximise their rate.
GBPAUD rates did appear to be headed for 1.80 and I have spent many weeks and months tracking this level for clients. Having come so close the rate could go back but we do need some changes in sentiments.
Further key news on the Australian Dollar is tomorrow morning with Australian GDP (Gross Domestic Product) data released. There is also plenty of other data throughout the week with Import and Exports data for both Australia and China on Thursday, China is the biggest purchaser of Australian raw materials which could trigger volatility on GBPAUD. The news does not end there with Friday Inflation data from China released which could see some further swings.
Friday is also important on GBPAUD since we have important UK data in the form of a GDP estimate and US economic data.
The US Dollar and the Australian Dollar also have an important relationship since as the US Dollar rises, we can often see the Aussie weakening. This is because the US Dollar is seen as better investment because of the potential for rising interest rates which would offer a greater longer-term return than the Australian Dollar.
There are predictions the US Dollar could see up to 4 more interest rate hikes this year which would see a shift on USDAUD rates, leading to a stronger US Dollar and a weaker Aussie Dollar. Such a trend which has already been in place since the US embarked on their rate hike cycle in 2016 looks likely to continue which should be reflected in a weaker Aussie Dollar against the Pound.
Of course, that trend will be subject to ongoing developments on the Pound and the Australian Dollar. The evidence of such a wide range of factors triggering movements on the Australian Dollar highlights the importance of keeping up to date with the latest trends and news. With so much happening this week that could move GBPAUD levels, highlighting any possible transfers and target rates well in advance could be a good idea.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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