The AUD’s woes have continued of late and despite a slight improvement against Sterling this week, the outlook for the coming weeks remains negative. The AUD has struggled all year for a variety of reasons but of late it’s the major downturn in the Chinese economy, which seems to be dragging the AUD’s value down. Australia’s trade links with China have been well documented but it is because of this heavy reliance on their exports, which is causing their economic output to drop and ultimately the AUD to weaken.
Add to this the Reserve Bank of Australia’s (RBA) recent stance and they have been happy to see the AUD’s value drop, in the hope this will boost the export of raw materials and help to solidify their economy. With overinflated house prices, particularly in Sydney also causing their economy problems, it may be that things continue to get worse before they improve.
Looking at short-term trends and the AUD has found some support this week, with an improvement of roughly 2 cents against GBP. With a host of employment & inflation data out overnight in Australia, expect increased volatility on AUD exchange rates as we head into the weekend.
We also have the latest Bank of England (BoE) interest rate decision and latest minutes released tomorrow. Whilst we do not anticipate a change in the base rate, any indication of whether members of the BoE did vote in favour of a rate hike is likely to cause Sterling volaitlity and could push GBP/AUD rates back above 2.20.
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