Spain Downgrades affects the Australian Dollar

AUDGBP Continues to Rise, But How Long For?

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