With the recent unrest in the Ukraine investors have been wary of holding riskier currencies including the Australian Dollar, New Zealand Dollar and South African Rand. Furthermore, with geopolitical uncertainty this has also weighed heavily on what’s happening in the US as US Dollar weakness has led to falls for the Australian Dollar too.
GBPAUD exchange rates have traded above 1.82 on a number of occasions last week and I think this current weakening could continue. With elections due on 25th May if they get delayed or cancelled Obama and Merkel have already suggested increasing sanctions on Russia.
US jobs growth on Friday was a little bit better than expected but wage inflation still lags behind inflation in the world’s leading economy. However, the UK has hit their best levels of unemployment since 2009 and also wage inflation has now surpassed inflation for the first time in a very long period hence the reason for Sterling’s strength across the board during the last couple of weeks.
For me I think the UK will continue to remain the currency of choice whilst the uncertainty surrounding the UKraine continues. Typically investors will choose a safe haven currency in times of uncertainty and as long as this continues I would expect Sterling to drift higher against the Australian Dollar.
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