In the last four weeks the AUD to GBP rate has given up nearly three percent, following a near 10% gain from the start of the lockdown pandemic. The AUD to GBP is currently at 0.5324 whilst it was at 0.5649 at the end of July. Over the course of the next few weeks it will be interesting to see if the trend continues with Sterling making further gains. The Australian economy like much of the world has seen difficult circumstances thrust upon them from a economic perspective and the rebuilding is expected to take several years.
The geography of Australia will prove to be one of the toughest factors as the regional lockdowns will effect so much of their prospects. 80% of the whole population live within the five biggest states so when a area is closed down it has a serious impact unlike the US or the UK which is spread over the whole country. As the main method for dealing Coronavirus is regional lockdowns this prolonged process could really start to have a major impact on Australia. Based on this logic they could be left behind by the other recovering economies. They were able to limit the spread quickly due to the high density of the population as everyone was locked down in one swoop, however this could be detrimental to the recovery.
Sterling has also been finding a slightly improved level of support in the last few weeks as there is confidence that the UK and EU may come to a deal in the course of the next few weeks. The start of august saw both negotiating teams take a two week holiday so there has been no progress to this date in August. However the UK Head Negotiator David Frost said last week that he believes a deal is possible by the middle of September. Whilst the deal may be a considerable distance from the finished article it will hopefully mean the EU and UK can avoid a No Deal Brexit which would likely be negative for Sterling.
The UK has been a bed of uncertainty in the last few years and it may be the case that finally we can move away from that. Sterling did manage to climb back to the pre-referendum levels of 0.49 at the start of this year before the pandemic however there has been a sharp fall form there. I wouldn’t be surprised however if the UK can sort out a Brexit deal that we might see a resurgence to that level. Anyone who is looking to sell Australian dollars into Sterling may be sensible to consider their position and the potential opportunities presented by currency market movement.
RBA Meeting Notes
In the early hours of tomorrow morning we will have the latest reserve Bank of Australia (RBA) meeting notes being released. These will provide an insight into the most recent meeting and the thoughts of the RBA’s decision makers. The future of the Australian economy is up in the air and these notes could provide some insight into what the RBA may do next in order to aide the recovery. There has already been interest rate cuts to record low levels and there are major concerns for the unemployment levels through the country.
Whilst the State of Victoria is in lockdown so many people are unable to work and there will be a reliance on the state in order to keep people going. The RBA need to make sure their policies are in the best place to aid this process moving forwards. The debt level in Australia will climb to levels that haven’t been seen before with 2023 being floated around as the year the economy returns to levels seen before the COVID-19 pandemic began.
Keep an eye out for these notes as they could trigger a market movement, especially if the RBA share any drastic changes that they may think need to be put in place. Get in touch using the form below to discuss these factors in more detail, and how they could impact your currency exchange.