Reserve Bank of Australia unable to find solution to Australian Dollar Strength
Reserve Bank of Australia Governor, Glenn Stevens has recently stepped down and has been replaced by Philip Lowe stepping up from deputy governor. The Aussie Dollar is currently very strong due to very positive economic data, however the economy is heavily reliant on outside sources, specifically China. China are the biggest importer of raw materials from Australia and the strong Aussie is causing theses goods to become more expensive.
A central bank would usually weaken the currency in question by dropping interest rates. The RBA have recently taken action and cut interest rates but it has not has the desired affect. Philip Lowe now has to rely on jawboning in order to talk down the value of the currency which is not always successful. So with the RBA’s hands currently tied it does not look as though they will cause any significant movement on GBP/AUD using monetary policy. AUD sellers should be wary of the current housing bubble in Sydney and Melbourne however. Property is extremely overvalued and if the bubble bursts expect AUD to fall quickly in value.
Looking at the UK, Theresa May has indicated that Article 50 will be triggered in early 2017. Both Donald Tusk, the president of the European council and Martin McGuiness, deputy first minister have confirmed this is her intention. I think until article 50 is invoked Sterling will struggle to gain value. I think when the button is pushed we will see slight Sterling weakness and then a slow but sure pound rally.
Short term Aussie buyers are going have a bit of a nightmare deciding when the time is right to move. Limit orders and Stop/Loss orders could be used to maximise your return. I would be happy to assist if you have any currency requirements, providing an individual trading strategy while also offering the very best rates of exchange. If you would like to get in touch please contact me at [email protected] and I will get back to you at my earliest opportunity. Thank you for reading my blog.