GBP/AUD rates set for further exaggerated movements (Joshua Privett)

Australian Dollar Forecast: Why is the AUDGBP Rate Falling?

The recent movements on GBP/AUD exchange rates have been exciting an puzzling to many.

Near-daily 3 cent movements both in positive and negative directions have made graphs on GBP/AUD look like a particularly violent roller-coaster.

However, these movements are not due to either the Pound or the Australian Dollar strengthening against its counterpart. A string of negative news for both sides is causing one to gain the upper had over the other simply with news which isn’t quite as poor…

Sterling has begun 2016 very poorly:

  • Previous hints of an interest rate hike in the UK have been disproved and subsequently delayed until at least 2017 according to Governor of the Bank of England Mark Carney, due to expectations that our historic low inflation will be a burden for the foreseeable future

  • Severe flooding in the North, West, and most recently areas of the South-East have caused infrastructure damage measured in the hundreds of millions. Recently we have also seen it to have profoundly inhibited economic performance in December (the same will likely be seen when January’s figures will be made public to markets in February)

  • Fears of a Brexit are causing Pound weakness reminiscent to that which occurred as a result of the looming Scottish Referendum in 2014 – the financial world has never embraced changes to the status quo well.

However, further poor news out of China has shone a similarly negative light on the value of the Australian Dollar, reversing some of the recent losses on GBP/AUD exchange rates.

The big questions for currency markets from this point is which currency will be the eventual loser over the next few months. To answer this, we can look quite clearly to recent history.

In October we saw a similar situation for the Australian Dollar whereby poor news out of China caused its value to crash. However, the crash was sharp and quick, and rates had largely recovered to where they had previously been a month later.

By contrast, the Pound is currently under pressure from medium to long-term factors rather than short-term stumbling-blocks. So I would not be surprised if the end of January will see GBP/AUD buying rates testing the lower 2.0’s.

In the short-term buying opportunities for Australian Dollars may continue to emerge, but in a volatile market, a premium is put on the ability to move quickly.

A popular option at the moment, only available through selective currency exchange brokerages are ‘limit orders’. These are automatic orders placed into the currency markets and run 24/7, so that when your desired rate of exchange is hit, even whilst you are sleeping, your currency will be secured automatically to avoid missing out on any profitable movements.

I have never had an issue beating the rates of exchange offered elsewhere. I strongly recommend that anyone with Australian Dollars to buy should email me on [email protected] over the weekend whilst currency markets are inactive, and I will reply personally to discuss a strategy for your transfer in order to maximise your Australian Dollar return.