Australian Currency Outlook to Be Driven by External Factors in Days Ahead

AUD GBP Dips but Frydenberg Expects ‘Bounce Back’

Following the RBA Governor’s testimony yesterday, the Australian dollar will see its fortunes driven largely by external factors. The Chinese Coronavirus is still a concern and markets will remain quiet until the U.S. session as the key Non-Farm Payrolls (NFP) jobs figures are released in the States.

Governor Lowe Warns of Virus Risks as Interest Rates Remain Held

In his semi-annual Testimony to the House of Representatives economics committee, the Reverse Bank of Australia’s Governor Philip Lowe provided some insight to the Australian dollar prospects in the months ahead.
Key to his speech was a warning over the Chinese Coronavirus and a desire to keep interest rates low until inflation was seen.

Lowe talked of China’s growing importance to the world economy and stated: “The potential risk to the Australian economy I think is bigger than Sars and the truth is really none of us know how this is going to play out.”

His comments also highlighted that the crisis was affecting international students coming to the country and that tourism and the supply chains of companies importing from China. The latest news on the virus was that 41 people had tested positive for the virus onboard a Japanese cruise ship and this brought the total on the liner to 61, from 3,700 passengers. This is largest spread outside the mainland and will add caution to Friday trading ahead as traders want to reduce exposure ahead of the weekend.

On interest rates and policy, Governor Lowe stressed a need to keep interest rates low until inflation rises to the bank’s target of 2-3%. Dr Lowe also noted that balance sheet expansion will only be considered if the interest rate fell to 0.25%.

NFPs and GDP to Drive the Fortunes of GBP to AUD Exchange Rate

The market now turns to the U.S. employment figures on Friday, which will have a limited effect on GBP to AUD rate, however trading volumes will remain subdued throughout the morning UK session until the jobs release. From there we will likely see whether optimism or pessimism reigns in the stock indices ahead of the weekend.

For AUD/GBP forecast, Monday will give some more update on the Chinese virus situation and we also have the UK GDP release on Tuesday, which will be a key driver for the pair in the next week.

For more information on AUD exchange rates for an upcoming currency transfer, you can contact me, Daniel Johnson, using the form below.