Oil Price and the effect on the Australian Dollar (Tom Holian)

Commodity Based Currency AUD Struggles During Global Uncertainty

Oil prices have this week fallen to their lowest levels in 5 years as Chinese demand slows and the global economy shows signs of a slowdown. With the problems in Europe and China there is becoming less demand for oil and therefore a fall in the oil price.

Historically speaking a fall in oil prices generally strengthens the US Dollar as it make it cheaper for the US to import oil and therefore allows the economy to grow. This USD strength also means that global investors flock towards to the US Dollar and sell off riskier currencies which includes the Australian Dollar.

This is one of the reasons for the recent weakening of the Aussie Dollar.

However, arguably more importantly many large banks have called for an interest rate cut recently which has added further speculation that the RBA may cut interest rates at their next meeting due to be held in February. Economist at Goldman Sachs, Deutsche Bank and Westpac have all suggested a 0.25%-0.5% cut which is why the Australian Dollar has hit 1.90 on occasion during the week.

On Tuesday morning the RBA releases its minutes from its December meeting and any hints of a rate cut could see GBPAUD rates rise.

If you have a currency transfer to make and want to save money on exchange rates compared to using your own bank then contact me directly for a free quote. Tom Holian teh@currencies.co.uk