The Australian dollar has continued to strengthen across the board this week after trading above 2 a number of times during the last week against the British pound. The Australian dollar has been heavily affected by what has been happening around the world and as it is deemed a commodity based currency they can often feel the effects of a global slowdown.
However, more recently the news from China is that they are considering relaxing the controls on movement. This has allowed the Australian dollar to recover against a number of different currencies including the pound.
Global investor sentiment has also picked up following the announcement from the Federal Reserve that they are prepared to continue to use further stimulus to keep the economy propped up as much as possible.
Indeed, the Fed are in the process of buying $75bn worth of Treasuries every day this week. This appears to have encouraged a little more risk appetite and this has seen the pound vs Australian dollar exchange rates drop to as low as 1.95 earlier on today, which is seemingly better news, at least in the short term for anyone looking to sell Australian dollars to buy pounds.
Australian Dollar Reacts to Tightening of Movement Controls
Over the last few days the Australian government have started to follow similar shutdowns as to what has been happening in the UK and the rest of Europe. The virus appears to be on the rise in Australia so I expect the isolation controls to follow suit to that of what is happening in the northern hemisphere.
It appears that when you look at the performance of both the pound and the Australian dollar relative to a number of different currencies they have started to improve in value once the government has started to impose controls. Whether this observation is accurate is difficult to say but since the weekend the Australian dollar has improved vs the pound.
The Australian government has recently announced support of AUD$66bn in terms of helping the economy and this could another reason for the Australian dollar’s strength. Clearly the overriding factor which will influence the value of the Australian dollar is that of the global economy but if we see further signs that China’s reaction to the virus is starting to see an improvement could this be what AUD needs to make further gains?
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