The narrative on Australian interest rate changes is deteriorating to the point that Pound to Australian Dollar rates are beginning to visibly benefit, with GBP/AUD breaching 1.67 briefly for the first time since January.
Risk-aversion is now the name of the game, and we’ve seen riskier currencies whose value is largely tied to the commodity markets (oil, mining ores etc) losing ground against the Pound. The Australian Dollar has lost close to two cents on GBP/AUD in 24 hours of trading, and the likes of the New Zealand Dollar and Canadian Dollar saw similar losses.
Firstly, the Australian Dollar had already been softening since the beginning of the week now that reports during March of a potential interest rate hike in the Australian economy have been debunked, with wide expectations now that the idea of a further interest rate cut is a more likely prospect.
So why the sudden turnaround? Future demand has come into question, mainly due to increased tensions in the Middle-East and the lackluster performance of the Chinese economy as of late.
But the key turnaround has also come from currency speculators. Since the US active intervention in the Syrian conflict we are now seeing rife risk-aversion, resulting in mass-sell-offs of riskier currencies such as the AUD in favour of gold and safe-haven currencies such as the Swiss Franc and the Dollar. There is a reason that the Australian Dollar is at its lowest value against the USD since the middle of January.
So at the moment, for Australian Dollar buyers your future fortunes largely depend on the result of US talks with Russia beginning tomorrow. However, despite poor UK inflation data this morning rates are still moving in your favour with this dominant Syrian narrative. Thus it seems sensible to expect further improvements for AUD buyers at least in the run-up to Easter.
Australian Dollar sellers are now in a race to try and secure a sell price below 1.70.
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