The Aussie Dollar is in for a testing time over the next few weeks as we see the release of the Budget update which will publish news of spending cuts and measures put in place to claim AUD$4bn this year. International conditions have worsened recently owing to the slowdown in China and the instability in Europe which has seen a drop of AUD$21bn from projected tax revenues.
Since May the export of raw materials has dropped between 15%-35% for things like iron ore, thermal and coking coal which have been key drivers of the Australian economy in recent years. China’s economy has slowed to 7.4% for the seventh consecutive quarter and this has started to hit the mining economy which in turn could impact on the Australian growth prospects. I personally think we will see the Australian Dollar weaken in the long term (over 12 months) but in the meantime I would anticipate that the Aussie will head towards the lower end of the 1.50s if Europe continues to offer a bit more stability.
Owing to the recent problems within the Aussie economy this could provide more scope for the Reserve Bank of Australia to cut interest rates at next month’s meeting. So far we have seen a total amount of 1.5% cuts over the last year so another cut is not out of the question. If you have a currency transfer to make and want to find out what is happening to the Australian Dollar continue to keep reading or alternatively ask me a question directly Tom Holian email@example.com