This is the second month in a row that figures have come in above expectation, with an official reading of 0.4% for May. In the below Australian Dollar report we look at the potential impact of positive economic data as well as the ongoing trade war pressure being felt by all commodity based currencies. The table below shows the difference in AUD you could have achieved when making a £200,000.00 transfer during the last month, depending on the rate of exchange available at the time.
|Currency Pair||% Change||Difference on £200,000|
Growth in April was also revised up from 0.4 to 0.5%, with this positive data helping to curb any further losses for the AUD, following a tough few weeks in the market.
The AUD failed to make any impact against Sterling during Wednesday’s trading, despite the positive data I’ve mentioned. GBP/AUD are currently trading around 1.79, with a move back above 1.80 now a feasible scenario, despite the markets concerns around Brexit and the UK economies future standing.
The main reason for the AUD current plight has been discussed throughout this report. Fears over a global trade war are putting severe amount of pressure on all the commodity-based currencies and the AUD is certainly not immune to the current downturn. In fact, due to Australia’s close trading ties with China its exposure is greater than most and this uncertainty and an obvious slowdown in global trade, has been mirrored in Australia’s latest set of trade balance figures released yesterday.
These showed a huge drop between the money Australia was making from exports, to what is spending on imports. This is a clear indicator that the current climate is likely to prove unhealthy for the Australian economy, with a continuation on this path potentially pushing the country towards its first recession in 26 years.
This may seem like a worst-case scenario but Australia is so heavily reliant on global growth and a healthy trade balance, that any downturn in this sector could have potentially disastrous ramifications.
President Trump’s trade tariffs have the ability to do just that. If he continues along the same path, at the very least it is likely to cause investors to shy away from many of the export driven currencies, including the AUD. The potential negative knock-on effects of this are currently being priced into the AUD’s current market value, which is one of the main reasons it under increasing pressure, even against Sterling.
It is interesting to note that this scenario is occurring despite the UK economy facing its own set of problems. The Pound is under severe pressure itself but at present, is holding its position against the AUD and other commodity based currencies.
The Pound itself it likely to find a lot of resistance under 1.85 and any upturn in the global markets could bring with it renewed optimism. If that were to occur then the Pound is certainly susceptible to losses, with fears over Brexit and the UK governments stagnated approach likely to drag Sterling’s value lower.
Either way, the current climate is growing more unstable and the uncertainty this brings is putting pressure on both the AUD and the Pound.
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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