GBP/AUD rates have a hit a fresh 7 year high, with the Pound’s recent momentum showing no signs of letting up. The AUD has suffered of late due to a slowdown in their exports, which has come about due to a lack of demand for Australia’s vast supplies of raw materials. Australia’s economic wellbeing relies heavily on this sector and with a major slowdown in China’s economic growth, this sector has been hit particularly hard of late.
We also need to consider that the Reserve Bank of Australia (RBA) remain steadfast in their commitment to lowering the value of the AUD, in order to boost trade and whilst this commitment remains it is unlikely the AUD will gain any sustained market support.
We also had comments yesterday from Bank of England (BoE) governor Mark Carney, who indicated that if the current trend of positive data continued in the UK that we could see interest rates raised sooner than expected, which immediately lent further market support to the Pound.
My one concern is that the current trend cannot last forever and if GBP/EUR rates continue to climb then the BoE will need to try and control Sterling’s value otherwise the UK could find themselves in a similar position to Australia, due to the fact that our goods and services will become too expensive for trade. If this scenario continues then the BoE may start to talk down the UK economy to try and control Sterling’s value and this in turn will have a knock on effect for GBP/AUD exchange rates.
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