Will the Australian Dollar continue to strengthen?
Australia has had a wave of positive data for a considerable period. In fact, the Australian economy is only a month away from entering it’s 104th consecutive quarter of economic growth without a recession, breaking the Netherlands previous record. Despite many major economies struggling of late, consistent high commodity prices have benefited Australia.
When you have strong data combined with the uncertainty surrounding Brexit there is the possibility GBP/AUD could drop below 1.60 short term. The pair is currently threatening to as it sits at 1.6080.
Personally, I feel Sterling is chronically undervalued and once article 50 is triggered and trade deals become more apparent the pound will begin to rally, although this will take time. Keep in mind Australia may be forced to weaken the Australian Dollar through monetary policy as if their biggest trade partner, China, feels goods are becoming too expensive they may seek cheaper alternatives elsewhere.
Keep a close eye on the budget today, The pound will respond to how bullish Hammond’s spending will be. He may of course try and push the major issues on to the Autumn budget after stating this will be last Spring meeting.
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