The Aussie has risen slightly during overnight trading as Private Sector Credit data showed a small increase from 0.4-0.5%. This is not the most earth-shattering news but it highlights an area of concern for the Australian economy, that of credit in general. More on the domestic and global factors impacting Aussie rates below, with the difference in AUD return you could have achieved when selling £200,000 during the high and low trading points of the past month.
|Currency Pair||% Change in 1 month||Difference on £200,000|
The Australian dollar has been much weaker in recent months, owing to events both in Australia and abroad. At home, there has been a concern over household debt and credit as consumers have taken on ever-increasing levels of personal debt and higher mortgages to buy into Australia’s housing boom over recent years. Whilst the Reserve Bank of Australia (RBA) had previously mooted raising interest rates, there are major concerns over how damaging this could be to consumers.
Australia’s levels of household debt relative to income hit record highs in recent months, and many households are in negative equity. A major issue is that house prices have been falling with one index recording 11 months of decline, which is likely to continue. Many homebuyers, already mortgaged to the hilt will now find themselves in negative equity where even if they were to sell, they would still owe the bank or mortgage company. Such a dramatic personal situation stunts consumer spending and is a major factor for the RBA to take into account when considering raising interest rates, a move that would only compound this issue.
Abroad, concerns over the trade wars between China and the US are proving a headache for the Aussie dollar, via the the Chinese economy.
These Trade Wars have been shown to be not quite as bad as many anticipated with tariffs of 10% from both the US and China engaged, rather than the 25% expected. This light relief from an otherwise very serious issue may prove short-lived.
Another overseas factor driving weakness on this antipodean currency is the US raising their interest rates.
As a higher yielding currency, the Aussie had always benefitted from investors parking their cash down under for a higher return. Now the US interest rate is higher and expected to increase further, the Aussie continues to lose its shine.
The pound is lower against all currencies bar the Australian dollar; we are only 3 cents off the post-Brexit highs of 1.84 seen in April 2018. Considering the low in the same period was 1.59, those buying Australian dollar with pounds are getting an extra 15%,or an extra 50,000 AUD on a £200,000 transfer, not bad going at all.
This is great news for AUD buyers with pounds but can the good news last? Brexit is likely to present more significant hurdles ahead so clients hoping for further gains might wish to carefully consider their position. Please get in touch to discuss with our expert team.
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.
Jonathan Watson as ever, ensures a smooth, reliable and trustworthy transaction for the second time of service! Delightful to deal with – efficiency personified. Thank you Jonathan. Would recommend highly – 5Star.
Excellent initial guidance, and during the transaction regular communication and updates. Dealing with Jonathan Watson was a pleasure. Very reassuring.
Jonathan Watson provided very helpful advice throughout the process, as well as immediate responses to our inquiries. He and his team were patient and thoroughly professional, which helped us through some stressful moments following the sale of our property in France.