AUD Recovers after strong day of trading yesterday from the Pound (Joshua Privett)

Australian Dollar Forecast: Why is the AUDGBP Rate Falling?

Yesterday’s quick announcement for the new conservative cabinet was met remarkably well by the currency markets. One business day after the election announcements, and the Tories seemingly keen to get the ball rolling immediately after coming into office, boosted business confidence in the Pound – resulting in gains against all major currencies.

Anyone who follows the currency markets regularly knows that any strong gains one day are, at least, slightly corrected the next. But it seems the Australian Dollar has produced a strength of it’s own and rallied even further than the EUR and USD against Sterling. After a poor run over the last few days for the Dollar, due to poor economic forecasts for China (a big buyer of Australia’s iron ore deposits), markets were impressed by the new budget released from Australia yesterday evening.

Believed to be very business friendly, the new budget is geared towards youth employment, tax-breaks and substantial infrastructure investment across the North and Eastern coasts. An interesting article for the ‘winners’ and ‘losers’ of the budget can be seen here.

Could the AUD weaken again? After only a recent rate cut I feel this may be asking a bit much for GBP-AUD rates. If any animosity appears between the new Conservative government and Europe in the next few weeks (as the Conservatives will be setting the agenda for their time in office, with a referendum on the cards) I think it is more likely that we will see a snap-back in the rates further than what we have seen today, rather than potentially a 1 cent swing further in the favour of AUD buyers if issues with China intensify in the short term.

If you have a requirement to buy AUD in the next few months, contact me on the trading floor while the current rates are still in the 1.9’s on 01494 787 478, or email me on jjp@currencies.co.uk to have a tailored discussion of your situation.