RBA and BOA in very different positions in regards to Interest Rate Strategy (Daniel Johnson)

AUDGBP Continues to Rise, But How Long For?

BOE indicate possible Interest rate hike

Mark Carney, the governor of the Bank of England has recently stated there is the strong possibility of an interest rate hike in the coming months. The justification behind this move however is dubious. Inflation is at 2.9%.

Inflation is only healthy for an economy provided average wage growth is moving at a similar pace. This is not the case, latest figures showed a decline to 2.1%. If goods and services are more expensive and consumers are making less money there could well be reluctance to spend. This is when there could be the potential for recession. So why encourage consumers to save by raising rates when you should be encouraging consumers to spend?

Unemployment has also been cited as justification for a rate hike. These are being lauded as the best figures since the 70’s, but this release is misleading as zero hour contracts have recently been introduced and will make up a significant chunk of this data.

The MPC who vote on interest rates voted 7-2 in favor of keeping rates on hold this month. Is such a big swing possible by November?

Still, investors are biting with GBP/AUD consistently breaking 1.70 and Carney is doubtful to change his stance during today’s speech.

RBA concerned about Australian Dollar strength

The Reserve Bank of Australia (RBA) entirely different predicament, whereby the strength of the Aussie is cause for concern. The primary export for Australia is iron ore, Australia is heavily reliant on the Chinese purchasing this raw material. The strength of the Aussie and dwindling growth from China is a real threat to long term economic health. Philip Lowe the head of the RBA has attempted to talk down the value of the currency but has not had the same success as Carney. If you are buying AUD, I am of the opinion maximising your return will depend on your times scale.

If you have a currency requirement I will be happy to assist. It is crucial to be in touch with an experienced broker when the market is currently so hard to predict. If you let me know the details of your trade I will endeavour to produce a free trading strategy to suit your individual needs. Have faith knowing you will be dealing with a brokerage in business for over 16yrs, Foreign Currency Direct Plc. We are a no risk entity as we do not speculate on the market and we are registered with the FCA. If you have a currency provider take a minute to send over the rates they offer and I am confident I can demonstrate a significant saving.  I can be contacted at dcj@currencies.co.uk . (Daniel Johnson) Thank you for reading.