Australian Dollar Strengthens against Sterling

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The Australian Dollar has strengthened against Sterling after hitting its lowest level in 6 months. GBPAUD is trading at levels of 1.5950 this morning. Following the news that Spanish bond yields have improved a small amount of confidence has returned across Europe resulting in an opportunity for investors to look at buying Australian Dollars again. However, until 17th June when the Greek elections are due to take place we could be in for a very uncertain period. Also, the positive news released from the G8 summit at Camp David has now been factored in and didn’t have the desired effect on the currency markets but will hopefully provide us with some short term support for global stock indices. Even if the Greeks can form an government which is a coalition if they don’t want to adhere to recent austerity measures requested by the EU Bailout fund then the question to be asked is where next for the Euro?

Some economists are predicting that the AUDUSD could soon revert back to levels of 90 US cents before getting even worse. Since the credit crunch and the collapse of Lehman Brothers in 2008 the AUD$ exchange rate is up 70% which in the long term is surely unsustainable.AUDUSD dropped below parity for the first time since December 2011 as concerns remain about the Greek crisis. The potential worsening of the global economy and the slowdown in Chinese growth and lower Australian growth could result in the RBA being forced to cut interest rates. In the last few years with Australian interest rates much higher in comparison to the other western economies it has been very attractive for investors to gain interest by having money in Australian Dollars. The current cash  rate is 3.75% with some economists predicting it could be cut to as low as 2.25% which could have a huge negative impact for the Australian Dollar and result in an improvement for GBPAUD exchange rates. This is a very long term view and with uncertainty comes volatility so if you need to buy Australian Dollars or make a currency transfer please do not hesitate to contact me Tom Holian quoting ‘ADF’ teh@currencies.co.uk