The Australian Dollar has strengthened today in the run up to the FOMC’s decision about whether or not to go ahead with further stimulus otherwise known as Operation Twist. The FOMC has been meeting for the past two days and is due to announce the decision tonight at 615pm UK time. The main aim of Operation Twist is to reduce long term interest rates and to encourage borrowing and spending in order to boost the economy. My personal opinion is that if the US decides to proceed with further stimulus we could see the GBPAUD exchange rate drop to as low as 1.53 tomorrow as investors look towards riskier currencies again. The Euro has weakened prior to the meeting but the Aussie has remained stable between 1.54-1.55. With the G20 summit creating some stability in the global markets and Greece now having formed a coalition government this morning we could see the Aussie strengthen.
With the Reserve Bank of Australia hinting that they will not be cutting the cash rate at its July meeting this could also be another reason why there’s been a boost for the AUD. I think Operation Twist has been priced in so it’s unlikely that there will be a large movement but potentially a small improvement nonetheless. For further information please feel free to contact me directly Tom Holian [email protected] quoting ‘Australian Dollar Forecast’ for preferential exchange rates.