Australian Dollar Gains Considerably against the Pound after Bank of England Holds Interest Rates (James Lovick)

The Australian dollar is seeing a volatile time and is continuing to come under renewed pressure having fallen against all of the major currencies yesterday. The Australian dollar has now dropped to the lowest level against the US dollar since June 2017. The reason for the most recent slide is really down to geopolitical concerns over the US pulling out of the Iran nuclear deal. With the perceived risk of escalating tensions in the Middle East this is proving negative for the Australian dollar.

The US dollar is strengthening as one would expect in uncertain times especially as the US dollar remains a safe haven currency. The flip side is that the perceive riskier currencies such as the Australian dollar do not perform as well with funds moving out of Australia. The outlook for retail sales in Australia is not looking too bright at the moment either which is also keeping the dollar at bay.

GBP AUD

The Bank of England held interest rates today as widely expected although the pound has fallen dramatically against the Australian dollar today with rates dropping below 1.80 for the GBP AUD pair. There is currently an excellent opportunity for those clients looking to sell Australian dollars for pounds. The Bank of England have cited Brexit uncertainty as reason not to hike after a poor run of economic data.

Those clients looking to buy Australian dollars with pounds could see some better opportunities to come although Brexit uncertainty could still prove to a burden for the price of sterling. Any wobbles here in the negotiations could see a drop for sterling although it must be said that the outlook on Brexit is starting to look considerably better and negotiations are now in the third and final round.

Over the water the Reserve Bank of New Zealand held interest rates last night but was interesting to hear is that the new Governor Adrian Orr signalled no desire to raise interest rates. In fact he cited inflation as too low and that it would need to rise to 2% before the central bank considered raising interest rates, something the bank does not foresee happening until late 2019. There are some similarities between the New Zealand and Australian economies as they are both commodity currencies and in my view this is a signal that Australia too is unlikely to hike any time soon. With no rate hikes on the horizon down under this is likely to be negative for the Australian dollar.

For more information on the Australian dollar and how to time your own transfer when either buying or selling Australian dollars then please get in touch with me at jll@currencies.co.uk

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