Will Greece leave the Euro and how will it affect the Australian Dollar?

AUD GBP Struggles for Direction with Retail Sales Due

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The Australian Dollar has rallied since yesterday against the Pound from its 5 month low as suggestions were that the recent fall have been a little excessive. I personally am expecting further Australian Dollar weakness. There is concern that Greece may be forced out of the European Union after failure to form a government and agee the recent austerity measures imposed by the EU Bailout fund. The issue is that without a government they cannot agree the austerity measures and they cannot form a government so can also not agree the austerity measures resulting in a Catch 22 situation. The Greek President Papoulias is today attempting to persuade opposing parties to agree his proposal to form a government of non-politicians to help sort the country at least in the short term. Expect volatility to continue across the Eurozone which will lead to instability for the Australian Dollar exchange rate and help keep Sterling at 1.60 vs the Australian Dollar.

The Reserve Bank of Australia’s Minutes showed that the cash rate was cut to. 3.75% in order to assist growth in the Australian economy. Growth outside the mining industry has slowed and the high exchange rate is not helping Australian exports which means in theory less money is brought into the country damaging for the wider economy. Don’t get me wrong Australia is still an attractive economy especially for its commodities but elsewhere is is struggling. There are many economist who believe the RBA will cut rates further in attempt to stimulate growth  but it is unlikely to happen next month. Indications are that a rate cut could be seen in September. For further information please contact me Tom Holian [email protected] or call me directly 0044-1494-787-478.