Will pressure on Sterling result in further falls for GBP/AUD, even if the RBA doesn’t want a stronger Aussie Dollar? (Joseph Wright)

There has been a lot of talk recently from both economists as well as the Reserve Bank of Australia that the Aussie Dollar is an overvalued currency.

Of all the major currencies the Aussie Dollar is the 4th best performer so far in 2017, and whilst this sounds like a positive thing to many the reality is an overvalued currency isn’t great news for export driven currencies due to the fact that it makes purchasing goods from Aussie more expensive, and therefore negatively impacts the economy.

The issue the RBA have is that cutting interest rates again in order to stem demand for the currency isn’t easy, as the likely market reaction within the property market would be negative. This is why I don’t think there will be a rate cut, as the property market is already overheating and if they make mortgages even more affordable that problem could spiral, especially in the East-cost of the country where property prices are already very high and unaffordable in many cases.

The Pound is coming under increasing pressure due to the Bank of England’s decision not to raise interest rates, and also just yesterday it emerged that the BoE’s forecast for the UK economy in 2017 isn’t going to grow at the rate they had previously expected.

If you have a large currency exchange to carry out in the coming days, weeks or months then you are more than welcome to speak with me directly as I will be more than happy to help you both with trying to time a transaction and getting you the top market rate when you do come to buy your currency. A small improvement in a rate of exchange can make a huge difference so for the sake of taking two minutes to email me you may find you save yourself hundreds if not thousands of Pounds. You can email me (Joseph Wright) on jxw@currencies.co.uk and I will endeavour to get back to you as soon as I can.

 

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