Jonathan Watson
Associate Director
Could the Aussie Dollar weaken?
Australian dollar rises against its counterparts as the Westpac Leading Index rises.
Request a quoteOvernight, the Australian dollar has risen fractionally against its counterparts, in part owing to the release of the latest Westpac Leading Index, which rose from -0.08% previous, to 0.10%. The index tracks nine gauges of economic activity, including share prices and telephone installations, and can provide a snapshot of future economic outcomes.
The Australian dollar had been rangebound of late, as mixed outlooks on both the Australian economy and the global Trade War prevented any new major trends forming. The RBA (Reserve Bank of Australia) has cut its interest rates to record lows of 1% which has seen a weaker Australian dollar. However, whilst they said at their most recent meeting they are prepared for more cuts and may even look to more unconventional methods such as QE (Quantitative Easing) down the line, signs the housing market might have turned around had prompted a pause in any further immediate action.
In their most recent meeting Minutes, the RBA noted rising house prices in Sydney and Melbourne. Such news would be a reason to cautiously approach further cuts or easing. The improvements on the Westpac Index would lend further support to the RBA to hang off any major future decisions now too. The raising and lowering of interest rates can be a big factor to drive the value of a currency. Historically speaking, to cut interest rates will weaken a currency, whilst raising can strengthen the currency concerned.
What else will drive GBP/AUD ahead?
A key factor driving the RBA is also the outlook on global trade, with their main trading partner china suffering from the ongoing Trade Wars with the US. A recent pause in the escalation of the wars has seen the Aussie stage a small recovery, but with the RBA linking further cuts to any deterioration in the trade wars or the Chinese economy, there could be reasons for volatility ahead.
In other news the FOMC Minutes Wednesday may play a part on the market for AUD exchange rates, as this influences attitudes to global trade. Plus, this Saturday will see RBA Governor Lowe offer a speech, which might alter sentiments going into next week.
GBP/AUD levels are just below the interbank rate of 1.80, a region not reached for 2 weeks. Expectations ahead for sterling seem linked to Brexit, the focus at present is Boris Johnson’s Europe tour. For the latest news, you may wish to get in touch with your account manager.
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