GBP/AUD exchange rates have been loitering around the 1.60 mark for a number of days now and it appears that neither currency has the power to push through the current levels of resistance and make a break either way.
With Brexit and the triggering of article 50 clearly hanging over the head of the Pound the Australian Dollar has been on a very good run of form, seeing a huge boost last Wednesday when the Federal Reserve over in the U.S hiked interest rates but only gave the nod to a further two interest rate hikes this year as opposed to the expectation of seeing a further three.
Interest rate hikes in the U.S are generally seen as negative for the Australian Dollar as it makes the USD more attractive to investors. With the Australian Dollar and U.S Dollar a well known pairing that is used in carry trading, should either have news that makes it more attractive the other can suffer and you tend to see a large flow of money from one to the other very rapidly.
For those who are not aware, carry trading is a process where an investor borrows money in a currency with a very low interest rate (e.g USD) and shifts it to one with a much larger one (e.g AUD), making a difference on the two. When Australian economic data is poor or the U.S has some good news, you tend to see what is known as the ‘unwinding’ of carry trades, leading to the Australian Dollar weakening and the U.S Dollar gaining strength due to supply and demand.
Personally, I feel that the 1.60 rate will not be hanging around much longer and I would not be surprised to see a rise for the Pound, although be wary of Sterling getting the jitters in the next week or so as we close in on article 50 being triggered on 29th March, this is the official start of the process of the U.K leaving the EU.
For anyone with a large currency exchange to make, either involving buying or selling Australian Dollars it is imperative that you have a proactive and knowledgeable currency broker on your side throughout these turbulent times.
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