As the RBA decided not to change interest rates at their latest monetary policy meeting, the USD appears to be more attractive to investors looking for a good return. This AUD report discusses how a lack of interest rate rises from the RBA could make the Aussie Dollar less desirable. The table below shows the difference in AUD you could have achieved when buying £200,000.00 during trading on Tuesday.
|Currency Pair||% Change||Difference on £200,000|
Earlier in the week we saw the Reserve Bank of Australia (RBA) Interest Rate Decision. Rates remained at 1.5%, so no surprises considering the current economic situation down under.
Retail Sales data came in prior to the rate decision and they were some way off expectations. There was expected to be an increase from – 0.5% to 0.4%, but there was only an increase to 0.1% which caused AUD to fall in value.
Australian GDP came in overnight and we saw a drop from 0.6% to 0.4% QoQ and dropped from 2.8% to 2.4% YoY, which was just below expectation and so did not cause too much damage.
The Aussie has been a favourite among investors due to the promise of relatively high returns. The US Dollar however now seems to be gaining preference as it is considered a safe haven currency and is offering similar returns to the Australian Dollar.
The Federal Reserve also has a far more positive outlook in terms of monetary policy change and it is predicted we could see as many as three more hikes in 2018 which does not bode well for AUD.
Living costs in high wage growth areas such as Sydney and Melbourne are causing Australians to spend their hard earned money on necessities rather than luxury goods and services.
There needs to be an increase in average wage growth before a rate hike can be justified. I am doubtful of any rate hikes by the RBA until 2019.
1.80 is proving to be a resistance point on GBP/AUD. The rates quickly retract whenever it is looking like it is to be breached. For those with a requirement purchasing Aussie Dollars it may be pertinent to move if the market hits the high 1.78s or low 1.79s.
Due to the time difference a Limit order would be perfect for those buying the Aussie seeking to maximise their return. A Limit order lets the client set the target rate of exchange and should that rate of exchange become available it is purchased automatically.
Aussie sellers, I think 1.76 is a realistic target considering present conditions.
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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