Daily Archives: January 26, 2017

Forecast for GBP/AUD Rates – Where Next for the Pound? (Matthew Vassallo)

Those clients holding Sterling will have been pleased with the improvements they’ve seen over the past 10 days, with the Pound gaining almost seven cents from the low.

GBP/AUD rates are now trading around 1.67, providing clients with an AUD currency requirement some much needed respite.

This improvement has come in line with UK Prime Minister Theresa May’s Brexit speech last week and a far more softened tone regarding future relations with the EU, following the supposed triggering of Article 50 in March.

We have also had this week’s decision by the Supreme Court, which backed the High Court’s ruling. It means Article 50 must be ratified by MP’s before any official process to leave the EU can begin. This was priced in by investors ahead of time and was likely a big part of the reason that we have seen aggressive Sterling strength, as it likely means a softer Brexit than many first anticipated.

Personally, I think the markets were crying out for some solid information after basing their decisions on rumours and guess work and whilst I don’t expect the current Sterling strength to continue at the same pace, it may be wise to protect any AUD positions.

The AUD is still trading at some of the best levels of the past five years and is, in my opinion, over-valued against the Pound. The AUD has gained a huge amount of value over the past six months but this has as much to do with the complete lack of investor confidence in the UK economy, rather than an overriding one in the Australian.

The AUD has been the benefactor of this but the Reserve Bank of Australia (RBA) are unlikely to be pleased with such a strong dollar, as it will have a detrimental effect on their export industry. China is facing huge tax tariffs from the US following Trumps Presidential appointment and any slowdown in the Chinese economy, Australia’s largest trading partner, is likely to have a negative effect on the AUD.

As regular readers will know this is such a key component of their economy that any slowdown in this sector will hit them hard, as we witnessed following the unprecedented levels on GBP/AUD around 2010 (1.40).

We also had some better than expected Gross Domestic Product (GDP) figures for the UK this morning and again this is likely to increase confidence in the UK economy and the Pound could be boosted as a result.

This leads me to the conclusion that the downside risk for those clients holding AUD outweighs the upside gains and as such I would be tempted to lock in any short to medium-term AUD/GBP currency transfers and remove any risk from this unpredictable and fragile market.

If you have an upcoming currency transfer to make and are concerned about the current market instability, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact us on 0044 1494 725 353 and ask one of the team for Matt.

Alternatively, I can be emailed directly on mtv@currencies.co.uk and can answer any queries you have about the current market trends & forecasts.

Could Sterling hit 1.70 against the Australian Dollar this month? (Tom Holian)

Sterling has continued its recent fight back vs the Australian Dollar and has gone from strength to strength during the last fortnight against a number of major currencies.

The positive movement for Sterling began when Prime Minister Theresa May spoke out about the issue of Brexit and stated that she would seek parliamentary approval in order to go forward.

The Supreme Court on Tuesday finally gave its verdict but with Theresa May having already spoken out the impact of the news was not as important as it could have been.

Turning the focus to what is happening globally we have seen Donald Trump inaugurated last Friday and he is now in the White House for his first full week.

This has caused global markets to remain anxious and this has caused investors to sell off more riskier currencies which includes the Australian Dollar. This has seen GBPAUD rates improve by over 3% during the last fortnight.

Indeed, yesterday the inflation level in Australia fell which is likely to put more pressure on the Reserve Bank of Australia as falling inflation creates an argument to cut interest rates and if this does become a discussion topic then this is also likely to see problems ahead for the Australian Dollar.

To me the Pound vs the Australian Dollar is heavily under valued and if you remove the Brexit issue we would see GBPAUD rates much higher than where we currently stand. However, in the UK things are still politically uncertain so although I think we’ll see Sterling improve against the Australian Dollar in the short term it is difficult to see what may happen longer term.

Having worked in the foreign exchange industry since 2003 for one of the UK’s leading currency brokers I am confident that not only can I offer you better exchange rates than using your own bank but also help you with the timing of your transfer.

If you have a currency transfer to make and would like to save money on exchange rates when buying or selling Australian Dollars then contact me directly for a free quote and I look forward to hearing from you.

Tom Holian teh@currencies.co.uk