Is now the time to buy Sterling with Australian Dollars?

GBP/AUD exchange rates have started to recover recently and have improved during last week following the inauguration of Donald Trump. After his first full week of office, which has involved a number of controversial executive orders this is clearly going to have an effect on the global economy. His outlandish orders have upset many leaders in the global community and my personal opinion is that this could have a detrimental effect on the Australian Dollar.

The AUD$ is a commodity based currency and geo-political uncertainty often causes commodity prices to drop and as a riskier currency the AUD is often sold off in a period similar to the one that we’re in.

Trump has made suggestions that he will look to impose a 20% on Chinese goods entering the US and as China is such a large trading partner with Australia any problems for the Chinese are likely to have a negative effect on the Australian economy.

However, the Australian economy is currently in a very enviable position with its current account deficit now at just 1.3% of GDP, which is the lowest since the 1970s. With iron ore and the price of coal having risen recently and with Chinese demand still relatively healthy this has kept the Australian Dollar strong vs the Pound.

Indeed, commodity prices have risen by 50% since February 2016 but could we be in for an end to this positive news if Trump continues to cause fears over international trade. The Commodity Index is released on Wednesday and depending on whether we see a rise or fall this will impact what happens to GBP/AUD exchange rates.

I personally feel that the Pound is hugely undervalued against the Australian Dollar and once we get past the problems caused by the uncertainty of when or if Article 50 will be triggered I think longer term we will see GBP/AUD rates in an upwards direction. Therefore, if you’re thinking of selling Australian Dollars to buy Sterling it may be worth looking at getting something organised in the short term. Owing to the time difference it may be worth looking at placing a limit Order, which allows you to set a price, which can be achieved out of the usual trading hours.

Get in touch with us to discuss your Australian Dollar requirement, we may be able to save you thousands on a transfer. Call us on 01494 725 353 or email me here.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.