Pound to Australian Dollar exchange rates have had a roller-coaster day on the markets, and much of this has been allocated to new speculation about the potential for a rate hike in the US.
Whilst it may seem alien to be discussing events in the US with the focus of this post being on GBP/AUD the connection is very visible.
The value of the Australian Dollar is linked to its demand, and one reason why the Dollar has enjoyed much better demand in the last year has been because of its relatively high interest rates compared to other currencies.
There is an obvious attraction for their 1.5% returns compares to the UK’s paltry 0.25%.
However, demand is based on the global picture of currency, rather than just between the Pound and the Australian Dollar. Much of the recent movement on the exchange rates has been governed by a potential interest rate hike in the US.
Given that this is a much more stable currency than the Australian Dollar, some investors have been selling off their Dollars there in favour of the US version.
However, the potential for an interest rate hike in the US is now coming into question. Deutsche Bank are now calling into question the potential for a hike in March, and as a result, we are currently seeing the Dollar gain strength.
Whether this will be proven or be another wrong call from the heights of the banking world are difficult to say. This is a market which can change rapidly, and as such it is imperative to be in a position to move quickly.
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