Australian Dollar Forecast: Dovish RBA Minutes Weaken AUD

AUDGBP Strengthens Against but AUD Lower Against USD and EUR

A reversal of the Australian Dollars recent gains against most of its major counterparts continued during yesterday’s trading, following the latest release of RBA minutes from their meeting in June. Since the beginning of April, in particular against GBP and USD, the Australian Dollar forecast has enjoyed a period of strong gains mainly due to the coronavirus outbreak. Against the Pound for example, AUDGBP rates have gained by as much as 14% in the period since the beginning of April and this has created some of the best opportunities to sell AUD since early September last year. These gains have been even more significant against USD, with the rate moving by almost 20% in the same period.

In monetary terms, the volatility during the period of April-June on a £200,000 transfer into AUD could have seen a difference in return of in excess of A$45,000. This kind of volatility highlights the importance of working with a currency broker who can keep you informed of all the latest market news and updates to help you make an informed decision of when the best time could be to convert your currency. Please get in contact with us to hear more about how we can assist you when it comes to achieving a competitive rate on your currency transfer needs.

RBA Acknowledge Recent AUD Strength

One of the driving factors behind the Australian Dollar’s weakening at the beginning of this week can be attributed to the RBA’s recent meeting minutes which were released in the early hours of Tuesday morning in the UK. In the minutes, the Australian Dollar’s recent gains were highlighted by the bank and this could be a cause for concern going forward. The minutes stated, “Members noted that the Australian dollar had appreciated further relative to the US dollar and on a trade-weighted basis, to be around levels previously recorded in January.”

If the AUD’s trend over the course of the past few months continues, then it will continue to make Australian exports more expensive and this could deter potential investment from the US and UK. Therefore, we may continue to see comments from the RBA to help ‘artificially weaken’ the Aussie, as we have seen this week. It is therefore likely that we could see further volatility on AUD exchange rates moving forward.

In the minutes, the RBA were also a little more dovish on how the economy will endure the crisis going forward, particularly in the jobs market. They suggested that the pipeline for job creation is diminishing as businesses invest less in new projects, whilst the overall outlook for the economy remains uncertain.

Australia-China Tensions Continue to Impact AUD Rates

Another topic likely to continue to impact AUD exchange rates is the ongoing tension with China, which begun with Australia calling for an inquest into China’s role in the spread of the coronavirus. Since then there has been much retaliation from China, including tariffs on Australian imports, and now Australia are unhappy with a Chinese sentence to execute an Australian man for drug trafficking offenses. Australian PM Scott Morrison raised this issue earlier in the week and it is worth any clients with an AUD requirement keeping an eye on how relations between Australia and China continue.

Positive Brexit Deal Sentiment Boosts GBP

Developments in the UK this week have also contributed to Sterling making inroads against the Aussie, with a renewed optimism from London that there is still a chance that a Brexit deal will be agreed before the deadline at the end of this year. Boris Johnson has stated this week that the chances of a deal being reached are “very good” and it has been revealed that intensive face-to-face negotiations will kick off in July. As we have seen previously, the Pound has strengthened when a Brexit deal looks more likely, so if this positive sentiment continues then we could see GBPAUD rise further.

For the remainder of this week there are some significant data sets due to be released that could have an impact on AUD exchange rates. The Australian unemployment rate for May is due to be released tomorrow morning and is set to show a MoM increase. It will be interesting to see how the Australian jobs market has fared compared to the UK and US for example and this is likely to drive the impact on AUD. It is also worth keeping an eye on the BoE interest rate decision on Thursday and retail sales figures on Friday.

Keep in touch with your account manager here for the latest on how these data sets impact your currency transfer need, or get in touch using the form below to ask me a question directly.