GBPAUD exchange rates fell during the end of last week as the Swiss National Bank decided to scrap its capped exchange rate between Euro and Swiss Franc.
This caused a 30% movement between CHFEUR on Thursday and this caused global investors to panic. This led to a period of short term strength for the Australian Dollar as investors sold the Euro.
However, I still feel the recent period of strength for the Australian Dollar is likely to be short term.
The recent fall in copper prices and other commodities will inevitably be felt by the Australian economy going forward and this is likely to result in the RBA having to act to cut interest rates to weaken the Australian Dollar to make Aussie exports more competitive. Their next meeting is on 3rd February.
Against a variety of currencies of Australia’s major trading partners, the dollar is at 66.7 on a traded-weighted basis. Therefore the Aussie Dollar is down just 7.2 per cent since September.
The trend is that things seem to be slowing down although we did see some good news last week down under with unemployment falling to just 6.1% and stronger than expected Australian Trade Balance data.
We could see a few windows of AUD strength in the short term but I think longer term I would expect the AUD to weaken.
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