Daily Archives: May 3, 2018

Australian Dollar Exchange Rates Slide on Weaker Global Economic Outlook (James Lovick)

The Australian dollar is under further pressure at present after the growth outlook for Australia is starting to be cut. Commonwealth Bank for one has lowered its growth forecast based on a slowing global economy. We have already seen the Aussie come under pressure since the introduction of trade tariffs imposed by the US and China. These decisions by these nations are now starting to feed through into the forecasts which should weigh heavy for the Australian dollar which generally performs well when the global economy is growing at a healthy pace.

Clients looking to sell Australian dollars don’t see a bright future in the short term although any positive noises and downplaying tariffs could see some relief for the Aussie. US President Donald Trump is keeping the markets guessing and does not appear ready to start putting the brakes on the tariffs just yet. Until this happens the Australian dollar could have further to fall.

The Aussie has made some small inroads against the pound this week although this is more to do with weakness in the pound following weaker UK economic data and uncertainty in the Brexit negotiations. UK Prime Minister Theresa May is in for a battle later this month when the House of Commons will vote on various amendments that the House of Lords have put forward which are aimed at keeping Britain within the single market and in some cases even with a view to keeping Britain in the EU altogether. What this all means is political uncertainty and it is politics which can be a major driver for exchange rates. Rates for GBP AUD could fall materially lower on Brexit uncertainty.

Only yesterday following a Brexit cabinet meeting the Prime Minister faced strong calls to ditch the customs partnership model that had been put forward and certainly keep Britain out of any customs union. A harder Brexit or no deal scenario cannot be ruled out and any heightening of tensions could see the pound tumble quickly. In my view there will be more twists and turns to come and this could present those clients looking to sell Australian dollars for pounds with some good opportunities to convert.

For more information on the Australian dollar and when to convert then please get in touch with me James at jll@currencies.co.uk