The terrible attacks that took place this morning Brussels have caused a huge flight to safety on the global currency markets with the Australian Dollar strengthening by as much as 4 cents from the high to the low vs Sterling.
UK inflation data has also missed its target of 0.3% and coming out at just 0.2% has caused confidence in Sterling to fall as it highlights the problems that the UK is facing in terms of growth.
Indeed, it was only last week when Chancellor George Osborne announced that the UK has cut its 2016 growth forecast from 2.4% to 2% which caused problems for the Pound.
However, the over-riding reason for the strengthening of the Australian Dollar is that they are far removed from events in Europe and global investors have sold both the Euro & Sterling in favour of the Australian Dollar during today’s trading session.
RBA governor Glenn Stevens has claimed that Australia is better placed than most other countries to fend off a global economic problem owing to the fact that their interest rates are currently higher than most others.
This allows them to cut interest rates if necessary rather than use QE which arguably has failed to work in the Eurozone or in the UK.
I think this currency movement has been over-exaggerated today and I expect to see some Sterling strength during early morning.
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