Australian Dollar Weakens on Uncertain Outlook (James Lovick)

AUD GBP Sees First Positive Trading Day in a Week

The Australian dollar remains under pressure having fallen to a 4 month low following a decline in commodity prices including the price of metals. The US dollar has also seen a rise in US bond yields and this is something that impacts negatively on the Aussie. The Australian dollar has traditionally performed well when global investors have invested their funds into the higher yielding Australian dollar when interest rates have been considerably higher than in the US for example. The tide has turned now though after the US has begun raising interest rates and looks set to continue doing so throughout 2018. Funds have been moving out of the Aussie and back to the safety of the US dollar which has resulted in a stronger US dollar and a weaker Aussie.

The trade tariffs which have been imposed by the US and China also weigh heavily on the Australian dollar due to the wealth of raw materials down under and also considering the volume of exports that go to China. Any further signals that trade could slow down and impact negatively on global growth could see the Australian dollar weaken further.

In my view any progress on NAFTA which covers the trade agreement between the US, Mexico and China could end up having a positive impact on the Aussie if a positive trade arrangement can be reached. Pressure is mounting to have a decisions made by the time of the Mexican elections in the summer which could make for an interesting period ahead. Those clients looking to buy Australian dollars with pounds are seeing excellent prices available which are close to 1.85 for the pair. The Bank of England interest rate decision in May is also likely to throw up some sunrises and the rate hike that had been promised is no longer a certainty. In my view it is more likely the Bank of England will pause which could see GBP AUD come under some pressure.

For more information on buying or selling Australian dollars then please get in touch with me James at [email protected]