The Australian remains under considerable pressure as it has done for some time and this is unlikely to change shape any time soon. One of the big factors having a negative impact om the Aussie dollar is what is happening in the US. Where Australia had maintained some of the highest interest rates in the western world, the US is now looking to claim that spot.
The US is widely expected to raise interest rates at the US Fed meeting next week which will take rates up to 1.5%. Looking forward and rates are expected to climb higher with another two or three to be expected throughout 2018. The Reserve Bank of Australian on the other hand have made it clear there is no urgency to raise rates down under and will not follow other economies.
Interest rate rises can create strong improvements in a currency and the lack of action down under is helping to see the Aussie weaken as funds move out of Australia where the return on investment starts to become less.
Those clients with a requirement to buy or sell Australian dollars should pay particular attention to the EU summit which starts tomorrow and concludes on Friday. This is a major event in the diary as it will confirm where or not sufficient progress has been made by Britain in the Brexit negotiations to move on to phase two which will tackle the future trade arrangement.
After the breakthrough last Friday where Theresa May was able to broker a deal which covered the Irish border and where all parties agreed it is now expected that talk on a trade deal will be able to commence in the New Year. This in my view should be seen as very positive for GBP AUD exchange rates and a move towards 1.80 could become a reality.
There is no guarantee that talks will move forward especially after some political upsets this week between Brexit secretary David Davis and EU leaders although the general mood is looking positive. In my view there is a high chance that the pound will strengthen at the end of this week.
Those clients with a pending requirement to buy Australian dollars would be wise to get in touch ahead of this key EU summit as there is likely to be a considerable market movement on the back of it. Please feel free to contact me James at [email protected]