Australian Dollar Forecast: Why is AUD Falling?

AUD GBP Lower Ahead of PMI Data for the UK Economy

The Australian dollar forecast has continued to weaken against it’s major currency counterparts with the markets bracing themselves for a long run of potentially pivotal releases from down under and Australia’s key trading partners due in the early stages of this week.

Indeed, tonight the Reserve Bank of Australia will release the minutes from it’s latest monetary policy meeting with investors waiting for further justification behind the RBA’s generally reactive stance. Furthermore, we will also gain insight into the flow of Foreign Direct Investment into Chinese markets. This generally tends to hold added weight with investors. Given China is Australia’s leading trading partner, a pickup in investment can be taken as an indicator for robust import export data between the two in the long run. The release could prove particularly relevant given the ongoing controversy between the Chinese and Australian governments ever since the virus initially broke out.

Following a similar trend of thought, tomorrow’s latest inflation figures from New Zealand and indeed the minutes of the Bank of Japan’s meeting from last week could also help drive the Australian dollar’s value on the international stage.

Going into the second half of the week, a key trendsetter that might be worth noting is Wednesday morning’s Australian housing data. With rising household dept a well-documented concern for the Reserve Bank of Australia, even before lockdown, investors may be watching closely her for clues into whether or not consumer confidence is weakening and/or if lending conditions within the economy remain favourable. If you are in the market for Australian dollars and would like to plan around this release, you can register your interest on the link below.

AUD GBP: Looking to Buy AUD with GBP?

Against the Pound, we have started to see a downward trend develop with GBPAUD now hovering around the 0.54 mark, having failed to consistently break through the pivotal 0.55 mark earlier in the month. The shift marks a potential lack of confidence behind the Aussie dollar at present, particularly given the worryingly aggressive contraction we saw in UK GDP at the end of last week. The release saw the pound weaken against the majority of it’s major currency counterparts but not to any real extend with the Australian dollar.

Wednesday’s inflation figures due from the UK could further weaken the pound’s value however and may push sterling out of favour with the markets should the numbers reflect the negativity we saw on Friday. Those looking to buy Australian dollars may be tempted to secure a transfer at current levels just in case.

How is the Australian Dollar Performing Against the Euro and the US Dollar?

Against the euro, AUD has remained relatively range bound between the 0.60 and 0.62 mark. It is significantly up from the 0.52 levels we saw in March however which reflects a clear shift in global sentiment since the peaks of uncertainty the virus spread across financial markets back in the spring.

Tomorrow’s consumer confidence release from Europe’s heavy weight Germany could prove to be the main driver for the single currency in the first half of this week which will be followed by the latest ZEW economic conditions survey. Both releases have the potential to provide the markets with early insight ahead of Wednesday’s Consumer Price Index produced by leading eurozone body Eurostat. With leading German banks over the weekend confirming that the slimming interest rate levels imposed by the European central bank has costed European lenders no less than €25bn so far, the ECB will be looking for further justification in stagnating inflation levels via Wednesday’s release.

The Aussie dollar has remained strong against USD, still managing to hold its ground above the key 0.68 mark despite losing a fair amount of momentum after touching the 0.78. If AUDUSD is going to test this level once again, AUD holders will be hoping for weaker than expected retail sales figures due early tomorrow afternoon as well as further caution in Federal Reserve chair Jerome Powell’s speech on Wednesday.

Powell will address the public on Wednesday in an attempt to settle the markets and provide confidence that lending conditions will remain protected for the foreseeable. Given the ongoing social unrest in the states, the fear is investor appetite could shrink over the summer which could have further repercussions on consumer spending, business confidence and the jobs market. All three releases have come under a considerable amount of scrutiny ever since the US death count accelerated back in the Spring.

Get in touch to discuss these upcoming data releases in more detail and to find out the tools at your disposable to help limit your exposure to the potential upcoming volatility.