The Reserve Bank of Australia gave clear indication of further rates cuts as it pointed to a falling currency in order to improve its balance of trade. Although the dollar has weakened significiantly in the past 8 weeks (nearly 20 cents against Sterling) historically the dollar is still strong and these comments suggest there is potential for further movement in the weeks and months to come. The RBA also cited concerns towardst he non-mining sector as an area that is not attractinng the foreign investment required to help drive the economy, a weakening of the dollar further may give a boost to foreign investment into the non-mining sector. As a result I would watch for at least one more rate cut within the next 3-6 months and would expect a drive for GBP/AUD towards 1.67/68. Anyone sellung AUD may wish to look at their positions and consider the use of a forward contract should the funds not be fully available.
Anyone with a short term position watch out for the Bank of England minutes released tomorrow morning, any hints towards further Quantitative Easing and we could some short term sterling losses tomorrow – sellers may look to watch for a potential opportunity at 09:30 BST.
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