The Australian dollar has suffered against the majority of major currencies as of late due to several contributing factors which led to an interest rate cut by the Reserve Bank of Australia (RBA).
|Currency Pair||% Change (Month)||Difference on £200,000|
Consumer spending remains a concern as Australians struggle to find spare funds due to the high cost of living in high wage growth areas.
The US/China trade war has also influenced the value of the Australian dollar. Australia has a heavy reliance on China purchasing its goods. Any slow down in Chinese growth has a knock on effect to the Australian economy and in turn the Australian dollar. Due to the trade war, investors have moved away from riskier commodity based currencies preferring safe haven currencies such as the Swiss franc and US dollar.
Following the news of a potential truce in the trade war ahead of the G20 summit the Australian dollar has made gains moving to an interbank rate of 1.8118 against sterling during yesterday’s trading session. The truce is however a tentative one and President Trump has stated he is prepared to impose further tariffs on Chinese goods if there is no progression in negotiations.
There have been similar instances in the trade war, for example, in March when it looked as if a deal was all but sewn up only for tariffs to again come into play. It could be the case that this is a small window of opportunity for the Australian dollar sellers.
On Tuesday we will witness the Reserve Bank of Australia (RBA) interest rate decision. We have recently witnessed a drop to 1.25% and many analysts have hinted we could see a further cut come Tuesday.
According to FX Street there is a higher probability of a rate cut occurring than not. If a rate cut was to occur this could potentially cause the Australian dollar to weaken. Due to it being quite a tight call as to whether the cut will go ahead or remain at 1.25%.
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