Australian Dollar holds higher appeal due to US economic uncertainty
Investors are favoring higher risk currencies following increasing US political and Federal Reserve uncertainties along with increases in commodity prices.The chances of a Fed rate hike are low due to Trump’s outlandish comments and commodities are in high demand for investors. This has seen higher demand for commodity based currencies such as AUD. Australia’s biggest export is iron ore and it nearly reached $78 a tonne during Friday’s trading, the highest levels we have witnessed since April.
The RBA have tried jawboning, attempting to talk down the value of the Australian Dollar rather than making any drastic changes in monetary policy. It is not having the desired impact and GBP/AUD currently sits in the low 1.60s. The Australian Dollar is performing well against the majority of major currencies and could be set to continue. If investors continue to leave the US dollar in favour of higher returns from the Australian Dollar we could see Sterling suffer further against the Aussie.
Janet Yellen, the head of the Federal Reserve is speaking at the Jackson Hole Symposium on Friday.The Jackson Hole Symposium is an annual symposium held in Wyoming. It is a forum for central bankers, policy experts and academics to come together and discuss monetary conditions and policies. If she gives any hints to a rate hike in the US the Aussie is likely to weaken and we could see small gains for Sterling. This is rather clutching at straws however as there is very little reason to think the pound will make large gains.
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