As regular readers and traders know, the Australian dollar is affected by a number of events, as well as economic news domestically and internationally. Internationally it is affected by both news from the US and China, the reason being is that Australia’s largest trading partner is China. It is an economy based on exports of its raw materials. As a result, any change to global growth or risk appetite make a quick impact on the strength or weakness of the Australian Dollar.
The trend this year against sterling, and most other currencies, has been the general weakness of the Australian dollar. Since march, it has lost over 14% of its value. This has been attributed to the change in global growth forecasts and concerns from China. This week we saw this continue, as GDP figures from China (the world’s second largest economy) fell again. It means that we have seen three consecutive quarters of reduced growth, and many policy makers are now concerned that China could create a global recession in the months ahead. This in real terms has weakened the Australian Dollar, making it cheaper to buy, as it pushed up towards the magical 1.70 mark that everyone is hoping to see.
So what next for the Australian Dollar?
Well I am of the view that it will continue to weaken this year, and I think it is likely that 1.70 will be reached. This makes anyone looking to buy the Dollar happy, and sellers a little more concerned. However, from a timeframe position, it is unclear when this will happen. I would expect to see 1.70 hit within the next 2 months personally, as this pressure from China puts a strain on changing interest rates again in Australia.
What I would say however, is that this pairing – GBPAUD – is a very volatile pair and it certainly will not move in a straight line. If you are trading the pair, it therefore can make a great amount of difference if you time it well. Here, Spike notification and rate alerts may be of use. register for them simply by emailing your details to [email protected]
If you would like a more personal chat about your situation, or the prices you have been offered, feel free to contact me at [email protected]
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