The Australian Dollar has improved vs the Pound during the last few days as political tensions between the US and China appear to be easing recently.
Previously, it was suggested that Australia could be caught in the middle of the trade wars between the world’s two largest economies and as Australia is heavily reliant on what happens with the Chinese economy this can often have a big impact on the value of the Aussie Dollar.
Longer term I still think the Australian Dollar will weaken once again as the economy is still rather fragile down under. Inflation is still below the required figure and the Reserve Bank of Australia have suggested on a number of occasions that they will be keeping interest rates on hold for the foreseeable future.
Meanwhile I fully expect the US to continue on its path of increasing interest rates during the course of 2018 and whilst growth continues to rise in the US I think this will cause global investors to sell off the Australian Dollar in favour of the US Dollar which will provide strong growth and a very positive yield.
This would typically cause the AUD to weaken against a number of different currencies including vs the Pound so I would expect the Pound to make gains in the medium to longer term vs the Australian Dollar.
In the short term the focus will likely turn to what is happening with UK economic data as data in Australia is rather thin on the ground this week.
Tomorrow morning UK inflation is due to be published and this has been a big factor in how the Bank of England has reacted recently as if inflation continues to remain high the general theory is that a central bank increases interest rates to combat high inflation and this would typically strengthen the currency involved.
On Thursday UK Retail Sales are announced and with the previous release having been affected by the ‘beast of the east’ I think we could see the data come out rather positively which could see GBPAUD rates recover towards the end of this week.
If you would like further information about what is happening with the Pound vs the Australian Dollar or if you’d like a free quote to buy or sell Australian Dollars then contact me directly and I look forward to hearing from you.
Tom Holian [email protected]