AUD Performing Better Following Good News From China (Matthew Vassallo)

AUD GBP Steady Above 0.5400 with Melbourne Reopening

The AUD has looked solid over the past week, following news from China that their economic growth had improved for quarter three of this year. As I alluded to in my previous post the Australian economy is heavily reliant on its export industry and with China’s the world’s second largest economy, their heavy demand for Australia’s raw materials has boosted the economy over the past few years and allowed the AUD to move up against most of the other major currencies during this period.

Following political uncertainty and a slowdown in China’s demand for Australia’s raw materials the AUD started to suffer and lost ground, particularly against GBP and the USD. There were also interest rate cuts by the Reserve Bank of Australia (RBA), who were concerned that they were alienating their trade partners (including China) due to the fact the AUD was becoming too strong. All of this combined to push the AUD down and we saw a particularly aggressive loss against the Pound as rates slipped by over 20 cents.

Recently though we have seen a gradual improvement with the AUD moving away from its recent lows following more positive comments from the RBA who indicated that we would not see any further rate cuts in the foreseeable future. This combined with an upturn in exports has helped to support the AUD around its current levels.

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