The Australian dollar has strengthened significantly this month against GBP, USD and EUR and this AUD rally has continued at the start of this week and over the past seven days. The main drivers behind AUD gains continue to be due to the country’s handling of the Coronavirus crisis and the control of the spread, along with a renewed confidence in investors and an expectation of increased demand for Australian exports. The Australian economy is heavily reliant on its exports of raw material such as iron ore, and with these prices rising this week, this bodes well for AUD exchange rates.
Speaking yesterday, Elizabeth Gaines, CEO of Fortescue said of demand for iron ore, “We have always adopted a multifaceted approach to engagement with China, which extends to procurement, financing and sponsorship. Going forward, we see strong ongoing demand for iron ore and anticipate a steady recovery in economic activity in China, which will continue to contribute significantly to WA’s and Australia’s prosperity.” This is a result of Chinese steel output and demand increasing due to their continued recovery and infrastructure improvements since the Coronavirus outbreak.
AUDGBP Gains by 5% in the Past 30 Days
Over the past seven days AUDGBP exchange rates have risen by as much as almost 2% and by over 5% during the past 30 days. This has seen some excellent opportunities to take advantage of for clients selling AUD to purchase foreign currency. Please don’t hesitate to contact us to find out how you can take advantage of these rates using our service and you can sign up for our market alert system to notify you when your target rate of exchange is achieved.
As a commodity-based currency, AUD exchange rates tend to gain when risk sentiment among investors is high. Risk sentiment has seen an increase this week with the news yesterday that Moderna’s Coronavirus vaccine has shown promise and has succeeded in producing antibodies to the virus.
How Will a Breakdown in Relations Between Australia and China Affect the Australian Dollar Forecast?
However, there could be cause for volatility on the horizon for AUD exchange rates, as Australia’s spat with their largest trade partner, China, continues to intensify over calls for enquires into China’s role in the initial spread of the Coronavirus pandemic. China’s purchases of Australia’s raw materials make up almost 40% of all Australian exports and so good relations between the two nations are crucial for Australian economic strength and therefore can have a significant impact on the value of AUD.
Many have seen China’s response to Australia’s call for an enquiry as a retaliation, in which they have threatened boycotting of certain Australian goods and raised tariffs on certain industries. In response to China’s comments yesterday and recent moves, Australia’s Trade Minister, Simon Birmingham, stated, “I would have thought the appropriate response from China’s ambassador in Australia would have been to welcome these outcomes and welcome the opportunity for all of us to work together on this important issue.” This topic is likely to continue to impact on Australian Dollar exchange rates and it is worth keeping an eye on developments as they unfold if you have an upcoming AUD currency transfer requirement.
In other headlines across the globe that could impact exchange rates, the IMF have warned that global recovery from the pandemic is likely to take longer than originally thought and have stated it is likely they will downgrade their growth forecasts for 2020 to a 3% contraction in GDP. New global projections are due to be released in June and are likely to cause swings in currency value.
GBPAUD Rates at Lowest Level Since October 2019
Meanwhile in the UK, the Pound has weakened as Finance Minister Rishi Sunak echoed the IMF’s comments that the UK’s recovery from the virus outbreak is also likely to be slower than originally thought. Speaking yesterday, Sunak said, “It is not obvious that there will be an immediate bounce-back. In all cases, it will take a little bit of time for things to get back to normal, even once we have reopened currently closed sectors.” As such we are currently seeing the Pound at its lowest levels against the Australian Dollar since October last year.
Those with an AUD transfer need should keep an eye out for Australian Manufacturing and Services PMI released tomorrow and a speech from Reserve Bank of Australia Governor Philip Lowe. These should give an insight in to how the manufacturing and services sector have been performing throughout the current crisis and how the potential to create movement on AUD exchange rates.
Get in touch using the form below to discuss these factors and how they’re likely to impact your upcoming AUDGBP currency exchange. I’ll be happy to get in touch and discuss your enquiry.