Last week the Pound’s buying rates for most major currencies, including to buy Australian Dollars, looked largely like a ‘V’ on most exchange rate graphs. A poor start to the week saw some of the losses reversed before the close of the weekend.
The improvements for Australian Dollar buyers on Thursday and Friday are likely to stop by close of play on Monday, and a better look at what happened last week explains why.
Most exchange rate movements last week were centred around expectations and the results of the Bank of England interest rate decision and monetary policy statement on Thursday.
Financial markets regularly move ahead of events. Due to 5 months of consecutive Sterling weakness off the back of these announcements, which effectively showed continual delays for an interest rate hike in the UK economy, markets were already beginning to price in a weaker Pound.
The mass sell of of Sterling saw its value against most major currencies gradually decline right up until the announcement at 12:00 pm on the 17th.
The revelation of a second month in a row of all 9 members voting to keep rates on hold, rather than the one or two who had previously voted for a hike, continued that Sterling weakness for about 20 minutes.
Wednesday’s Budget in the UK had actually stirred up rumors that the UK was considering an interest rate cut to go alongside the further severe austerity measures introduced by the Conservative Government. This accelerated the losses on GBP/AUD ahead of the event.
However, the press conference with Mark Carney following the announcement saw GBP/AUD rates climb dramatically. He reassured markets that it was still more likely than not that over the next two years the UK economy will be seeing a rate hike rather than a rate cut, which was enough to cause a surprise Sterling rally which continued into Friday.
However, this was not exactly positive news, simply less negative than what markets had been expecting. There was still a slight net loss on GBP/AUD between Monday and Friday.
Currency markets never move in a straight line. Opportunities still emerge even when it is accepted in the financial community that due to the EU referendum, we will be expecting further net losses until June due to the giant question mark over the Pound’s future.
Monday may be one such final opportunity before the almost inevitable slides we have become accustomed to following favourable spikes for Australian Dollar buyers. This slide will likely come as early as Tuesday with inflation figures for the UK to be released, which are currently at their lowest levels since records began and unlikely to have changed much in the space of a month.
Housing market date for the UK is set to show a promising boost due to the rush of buyers before the increase in stamp duty (tax on house purchases) came into effect last week. This may show the UK economy in a better light and be beneficial for the Pound.
I strongly recommend that anyone with an Australian Dollar buying requirement should contact me on [email protected] to discuss a strategy for their transfer in order to maximize their Australian Dollar return.
I have never had an issue beating the rates of exchange offered elsewhere, and there are numerous options open to you through a currency exchange specialist to make sure that opportunities are seized rather than narrowly missed out on in a volatile market place come Monday
Those who do not require their Australian Dollars for a few months can also fix any tempting exchange rates which emerge for their upcoming transfer to avoid the recurrence of the drops we have become accustomed to.
Australian Dollar sellers can do the same, and I can outline how to safely ride the expected movements in your favour to their peak, within the time period you have to complete your transfer.