GBP/AUD expected to be volatile with RBA minutes tomorrow (Joshua Privett)

GBP to AUD Steady as Markets Consider BoE and RBA Rate Cuts

GBP/AUD has been one of the major currency winners after the events of Black Monday last month. Highs of 2.23 were reached, but since then the rally for the AUD down to 2.16 on the markets today has been largely unabated.

Two reasons can explain the recent rally. The Australian economy has been publishing a string of positive data recently to show that they are in the process of recovery from bottomed-out commodity prices. Employment has been making regular gains recently and the recent shift in ore prices have given greater confidence to the Aussie.

Secondly, normal currency patterns of opportunistic buying at cheap levels can explain the gradual and sustained drive downwards for GBP/AUD. With the best rates available since 2008, it isn’t difficult to comprehend how many people are moving assets over to Australia while they are so cheap. Proceeds from house sales, inheritances, even savings are all being converted into AUD after the mammoth gains enjoyed recently. This drives up the value of AUD through greater demand which lowers GBP/AUD.

Before this trend continues back to where rates where before Black Monday, stuck in the 2.10-2.12 region, I expect a short term boost for GBP/AUD rates.

Tomorrow morning the Reserve Bank of Australia will be releasing the minutes from their recent meeting. Glenn Stevens, the Governor of the RBA, has repeatedly attempted to artificially devalue the value of the Australian Dollar to make their economic exports more competitive whilst global demand was slowing. Recent data for the Australian economy has shown improvement, enough for him to justify this approach.

With the Australian Dollar rallying he will likely emphasize the negative aspects of the recent China crisis during the meeting’s minutes in order to lower confidence in the AUD and keep his financial plan on track. This, however, will not change the current positive forces benefiting the AUD, so should this occur the boost will be temporary.

Anyone looking to take advantage of this event tomorrow should contact me on 01494 787 478 and ask for Joshua for tailored advice on how to buy when the market reaches a peak, as well as a free quote on their transfer. The current buying levels for AUD rates are fantastic, and I am happy to help you squeeze a little bit more out of the rates before the downward trend takes hold once more. jjp@currencies.co.uk