GBP/AUD spike but will this trend continue?

GBP/AUD rates have settled around 1.70 with the AUD now finding support around this level. Despite a downturn in the Australian economy over recent weeks the Pound is struggling to make an aggressive move above this threshold, which has become a key resistance level for the pair.

Whilst the Pound has its own problems as highlighted earlier in this report, the AUD has lost support since the FED’s decision to raise interest rates, coupled with a slowdown in economic data and an acceptance that growth forecasts are likely to be cut in Australia again for 2017. Investors have taken money away from riskier currencies such as the AUD and pumped it back into the US Dollar, which is going from strength to strength against nearly all the other major currencies.

A slowdown in the Chinese economy has also had a detrimental effect on the AUD, as Australia’s exports to China have slowed. Australia relies heavily on its export of raw materials and as such, like most of the commodity based currencies, finds itself under increased pressure when the demand for these materials slows.

The Reserve Bank of Australia (RBA) have left themselves open to further interest rate cuts in 2017 if necessary, news which is hardly likely to breed investor confidence. Whilst it is unlikely that we will see the AUD make a move back to 1.60 under current market conditions, I would still be tempted to take advantage of the recent improvement for the Pound and remove any uncertainty or risk, ahead of what is likely to prove another turbulent year for the pair.

A strengthening US Dollar coupled with signs of a slowing Australian economy could weigh heavily against AUD, and clients with a buying or selling requirement may benefit from getting in touch with their assigned currency expert. Call our trading floor on 01494 725 353 if you wish to discuss a transfer.

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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.