Weak US Data And Poor UK Inflation Sees Aussie Rise Against Sterling (Colm Gilhooly)

Increase in Risk Appetite Helps Support the Australian Dollar

With UK inflation dropping earlier in the week, and US retail figures showing a surprising drop and suggesting the Fed may still be a little way off a rate hike, the Aussie has managed to climb against sterling.  Some of the sheen has been taken off the pound of late due to mixed data and a suggestion that UK interest rates won’t go up until later in 2015 causing sterling to slip.  Despite UK unemployment falling again to under 2 million for the first time since 2008, average earnings increases are still below the rate of inflation which is another concern.

At the same time, whilst the RBA have been concerned by the strength of the Aussie, it doesn’t look like they will be changing interest rates in either direction giving the Aussie quite a bit of support.  However there is always a risk that given the concerns over global growth and inflation rates, the RBA may look at other measures to weaken the Aussie and boost exports rather than touching interest rates.  This could take the form of selling fx reserves or other measures – central banks have done this for years and you only have to look at the Swiss National Bank and Japan for recent examples of this and saw the Swiss Franc and Yen plummet.

Overnight the Aussie did slip back giving up some of its gains partly due to consumer inflation expectations, but more so profit taking on such a big move on a currency that has traded within fairly set parameters over the last few months.

If you need to make a currency transfer either to or from Australia, and want to get the best exchange rate, then feel free to email Colm at cmg@currencies.co.uk and I would be more than happy to explain how our services work.