Pound to Australian Dollar Forecast
The Australian Dollar has suffered of late due to several contributing factors. The most significant catalyst for the fall in Australian Dollar value is the US/China trade war. Australia is heavily reliant on China purchasing it’s goods and due to this any slow down in growth in China will have an impact on the Australian Dollar.
The Trump administration has placed significant tariffs on Chinese goods and China has retaliated with it’s own tariffs. The trade war is set to escalate and could be ongoing which does not bode well for the Aussie. Iron ore is Australia’s primary export to China and at present demand remains healthy which is good news for the Aussie, that is not to say this situation will last however.
Due to global economic uncertainty investors are choosing to shy away from riskier commodity based currencies such as AUD in favour of safe haven currencies such as the Swiss Franc and the US Dollar.
There are economic problems down under such as consumer spending and the cost of living in high wage growth areas such as Sydney and Melbourne. The Reserve Bank of Australia (RBA) took the decision to cut interest rates this month to 1.25% and there is the potential for further cuts.
The Australian economy is growing at its slowest rate in almost a decade, which has fuelled speculation surrounding how long Australia will sustain its run of over 27 years without a recession.
Despite the situation down under I believe the problems in the UK outweigh that of those down under. We currently have no PM and are in complete Brexit limbo. If Boris gets in the probability of a no deal could increase as he will be using this scenario as a bargaining chip to get a better deal from Brussels. A no deal is the investors worst fear and has the potential to cause further woes for Sterling.
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