Sterling vs the Australian Dollar has remained just above 1.80 for most of last week even after the interest rate rise in New Zealand.
Typically if the economy in New Zealand strengthens this tends to have a knock on effect on the Australian Dollar. It could be argued that this is one of the reasons why the Aussie Dollar remained at 1.80 instead of rising towards 1.82-1.83 levels.
Last week saw the announcement that UK GDP has now reached the peak levels last hit in 2008 pre-credit crunch. This helped to strengthen the Pound across the board against all major currencies and supports the comments from earlier this month when the International Monetary Fund predicted that the UK would be the fastest growing economy in the G7.
Global investors have been unsure recently where to place their funds and it appears as if Sterling is the main benefactor at the moment. With Sterling having reached 2 year highs against the Euro and 5.5 year highs against the US Dollar the Pound seems to be the currency of choice.
I think it is only a matter of time before the Pound gains against the Australian Dollar again as the IMF has also suggested problems with the overall global growth forecast.
As Australia is so heavily reliant on what happens in China if a global slowdown does occur China will be one of the main economies to struggle which in turn could have a huge negative impact on the Aussie Dollar in the longer term. Whether or not the IMF comments are accurate can be argued either way but if they come close to being true this could seriously weaken the Australian Dollar.
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