Australia’s commodity market has shown signs of picking up recently with iron ore having increased by 6.3% in the last fortnight. With other commodities including coal having also increased during this same period this has led to the Australian Dollar strengthening against Sterling. This has helped to reduce the trade deficit and this is one of the many reasons why the Reserve Bank of Australia have decided to keep interest rates on hold this month.
After the previous interest rate cut back in August we have seen a change in stewardship and the new RBA governor Philip Lowe has been rather bullish since he came in a few weeks ago. Sterling vs the Australian Dollar has remained close to 3 year lows trading in quite tight ranges recently but as the RBA have kept rates on hold this is likely to strengthen the Australian Dollar vs Sterling.
In the last three months GBP/AUD rates have fallen by as much as 9% or the difference of £11,250 on a currency transfer of AUD$200,000 and the negative movement is mainly down to the problems in the UK rather than down under.
Indeed, if a Donald Trump victory occurs this month this could also mean less chance that the Fed will change rates in December and this could lead to further risk appetite for the Australian which could send GBP/AUD rates lower before the end of the year.
Chinese data has also come out better than expected overnight with an improvement for manufacturing data in the world’s second largest economy. Australian Import and Export data and this will provide evidence as to how the Trade Balance figures will come out.
With commodity prices trading higher I expect this data to come out strong and this could see GBP/AUD rates challenge the recent 3 year lows. If you need to buy Australian Dollars in the short term then it might be worth looking at organising this in the near future. For a free quote then contact your account manager.
For more information on how commodity prices could impact the strength of the Australian Dollar, call our trading floor on 01494 725 353 and talk to one of our team.
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