With Sterling Australian Dollar exchange rates having gained 2% last week I feel that we could see some further improvements going into the last week of the month. The UK published Retail Sales figures which hit their highest level in 10 years giving support to the Pound. UK GDP also confirmed that the nation grew by 0.8% in the first quarter providing more confidence to global investors who have chosen Sterling over and above the Dollar and Euro last week.
With the Budget down under now having been fully digested it is predicted that it may hit everyone. Cuts are to be made on benefits, pensions and a higher tax rate to be levied which will clearly effect many Australians at both ends of the spectrum. The aim long term it to reduce the debt but it could have a negative effect on sentiment and confidence for consumers in the short term.
Economic growth and predicted growth both have big impacts on the strength of a currency so if spending is reduced this could harm the economy in the longer term and also the Australian Dollar.
For a while now I have been predicting that it is only a matter of time before the Australian Dollar weakens again. During 2013 we saw a movement of almost 30% from the low to the high and although I wouldn’t expect such an enormous move to happen again, at least in the short term, I do think the Australian Dollar is in line for a correction.
The UK economy has had a very strong run for the last few quarters since we left recession over 12 months ago and this has been reflected in the price of Sterling against all the major currencies including against the Australian Dollar.
With UK house prices having grown by an average of 8% over the last 12 months UK Mortgage Approvals due out on Tuesday morning could send Sterling in an upwards direction.
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