Even though Chinese stock markets have posted big losses during earlier’s trading session the Australian Dollar has actually strengthened vs Sterling this morning.
Typically any negative news from China often tends to weaken the Australian Dollar but it appears as though it is news from the UK that is dominating Sterling vs Australian Dollar exchange rates.
This morning Sterling has fallen across the board and I think the Chinese problems are now causing an issue for the Pound as any continuing signs of a slowdown are highlighting the problems for the British economy.
Bank of England governor Mark Carney is due to speak later on this morning and last week when he spoke this caused Sterling to fall as he stated that UK interest rates are unlikely to go up until 2017 which has caused confidence in the Pound to plummet.
Therefore, I think this morning we are likely to see more of the same causing Sterling weakness vs the Australian Dollar.
UK factories have also showed a slowdown according to the Confederation of British Industry and optimism is down which is another reason for Sterling’s demise already this week.
Tomorrow morning Australian inflation data is published and if better than expected could send GBPAUD rates in the direction of 2.
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