Monthly Archives: April 2012
Spain Downgrades affects the Australian Dollar
Standard & Poors have downgraded Spain’s credit rating to BBB+ further highlighting the problems within the Eurozone. The Australian Dollar forecast for the next few days all hangs on the decision of the Reserve Bank of Australia next week and whether or not they will cut interest rates. The outlook for the Spanish economy is gloomy and the country’s recession will cause problems to help combat their budget deficit.
The RBA has hinted that it may do something with the official cash rate as long as inflation rates under control. Recent CPI data is that inflation is at 2.2% within the RBA’s target of 2-3%. One of the problems for the Australian Dollar exchange rate is that it is used as a carry trade currency which means that any negative news in Europe could result is the currency weakening particularly for Sterling AUD exchange rates.
US GDP figures have come out this afternoon lower than expectation at 1.5% compared against 2.3%. This has moved GBPUSD to its highest level in many months and has provided the Australian Dollar with strength against the Pound. For further information please do not hesitate to contact me Tom Holian teh@currencies.co.uk
Which direction is the AUD heading as we end the trading week?
Sterling exchange rates have fallen a fraction in morning trading falling from the open of 1.56 to 1.555 at the time of writing. But what is likely to happen to finish of the trading week? For me the main data set for today and for those with an interest in the AUD whether it be buying or selling will be the US GDP data release set for 13:30BST this afternoon. Regular readers may find this an odd choice of data to affect the move of the Australian dollar but I will explain why below.
The US economy is the global barometer for investors and often used as a benchmark for investors risk appetite. The market is heavily driven by investors moves and the data at 13:30 will be keenly viewed. During times of greater economic certainty and an increase in global output you will find the move towards higher yielding currencies will often become more apparent, with Australian offering much higher interest rates than much of the rest of the developed world the currency is keenly viewed as an investment opportunity throught he use of a carry trade. Regular readers will be familiar with this trade but to explain in laymans terms it is the act of borrowing in a low yielding currency (JPY, CHF) to then invest in higher/riskier asset such as the AUD, NZD and ZAR – the idea being that the gain is made on the return of interest. Of course there are exchange rate risks involved and hence why during times of high market volatility it can often be avoided. My point to this is that of late the US has released some better data sets and should US output (GDP) be positive and better than expected, this may well cause an increase in global risk apetite and hence the move towards the carry trade – should this happen you could see the AUD strengthen as its demand increases, of course the reverse could happen should US GDP data be poor!!
To discuss my views or to talk about the market and your particular transfer in more detail then please email mgv@currencies.co.uk or call 01494 787 478 and speak to Mike.
GBPAUD hits 5 month high
Sterling hit a 5 month high during late yesterday against the Australian Dollar but has fallen back from its recent run to 1.56 following the lower than expected UK GDP figures. With the UK now officially in recession with a negative Q1 of -0.2% this has put a stop to Sterling’s recent strength. However, with the RBA still quite likely to cut interest rates I personally think we may see 1.60 in the next few weeks. Any further buying Australian Dollar opportunities could be negatively affected depending also on upcoming data releases from China.
Meanwhile Sterling has gained against the Euro to hit the best exchange rate in over 18 months at 1.2237 and even after the negative GDP figures we have seen Sterling continue to gain in strength against the single currency. EUR/USD is trading at 1.32 this afternoon and GBPNZD is at 1.99 with expectations for the Sterling Kiwi exchange rate to hit 2 to the Pound by the end of the week.
Australian Dollar Exchange Rates and Australian GDP
During yesterday’s trading Sterling made a gain of 0.7% against the Australian Dollar. In the previous twelve months the Australian Dollar hit record highs against the Pound but has lost ground since against most major currencies as China’s demand for raw materials has declined. Yesterday it was announced that Australia could post negative growth if it was not for the outside investment in the mining industry as this contributes 3.5% to Australian GDP figures.
Tomorrow morning sees the release of UK GDP with expectations for a growth of 0.1% possibly aided by the panic buying at the pumps recently which surely must have given the economy a boost. If the results published show we have avoided recession expect Sterling vs Australian Dollar to rise again.
Currently GBPAUD exchange rates are close to the highest they have been for five months so if you need to transfer Australian Dollars feel free to ask me a question. Tom Holian teh@currencies.co.uk
Will the Reserve Bank of Australia cut interest rates?
The Sterling Australian Dollar exchange rate has continued to improve to as high as 1.5670 during the trading session today after a low reading on producer inflation data. Chinese economic data for PMI showed a reading of 49.1 in April, below March’s figure of 48.3 which although positive it is still below 50 so therefore represents a contracting economic environment. The Australian Dollar forecast for the Pound is looking up at the moment with many looking for an exchange rate of 1.60 to the Pound as the next level of resistance.
The interest rate is the main news on the agenda and the chance of a rate cut differs from day to day and at the moment the chances are that the RBA will cut the official cash rate from 4.25%. If the rates are cut in May there is also the potential for them to be cut in June too. If you need to transfer Australian Dollars and want to find out the benefits of using a currency broker. Contact Tom Holian teh@currencies.co.uk
Sterling hits year highs against the AUD!
Sterling continued its strong recent run against the AUD hitting a new year high at 1.5605. I feel this run may well continue however AUD buyers should be wary of the the UK GDP figures due for release next Wednesday. The figures will officially confirm whether the UK is in recession or not and the result appears to be very much on a knife edge. Some analysts are suggesting negative growth could be seen and the UK would then be back in recession for the end of Q1 2012. I personally think we may just scrape through with a positive figure, but I do think it will be close. For anyone with a short term transfer to arrange it certainly could be one to avoid.
Should you wish to secure your dollars at the best levels in nearly 5 months then please email Mike at mgv@currencies.co.uk - this may include the use of a forward contract that allows you to secure funds for a guaranteed delivery date even though you may not have full availability of the funds. This contract is proving very popular for both buyers and sellers in the current climate.
GBPAUD 5 month high buying with sterling!
The trend that we have been warning of on the Aussie continued today with the pound touching a 5 month high against the Australian dollar. Will this continue?
Well I would expect that yes it will, particularly with Retail Sales tomorrow at 09.30 for the UK which is expected to show an improvement on February’s dismal numbers. Retail Sales is a major contibutor to GDP in the UK so this could move the pound depending on how the figures come in.
The real reason for the recent movement we have seen is a shift in attitudes to risk. The pound’s change of fortune is what boosted the rate this week but risk appetite is why we are now nearly 10 cents higher than the 1.4670 low posted only a few weeks ago… It has caused investors to flee the Aussie…
With the eurozone crisis back in the headlines and China’s GDP the lowest it has been in 3 years, investors have every reason to be concerned. I would not expect a massive sell off too soon, but investors are perched waiting to see how things pan out with Spain in the short term.
If looking to make any Aussie trades we can help make you aware of all the events moving your rate. There is a lot of data coming out soon that could see this pairing shift by a good few cents, that could cost anyone buying or selling Aussie dollars a lot of money if not managed properly. Examples include UK GDP, the prospect of a RBA rate cut and the continued uncertainty over the European and Chinese economic outlooks.
To have a free no obligation discussion about all the issues affecting your rate, and personal assistance with actually getting the very best price, why not speak to me direct on jmw@currencies.co.uk or call 01494 787 478.
We are based in the UK but can help clients all over the world and offer our support on non sterling trades too. i.e EURAUD, USDAUD etc. Speak to me to find out more!
