The AUDGBP exchange rate was higher on Thursday after recent economic data but traders will be concerned that Australia could follow New Zealand’s path, after radical changes to the country’s housing model saw a dump in the Kiwi dollar.
AUDGBP trades at 0.5558 after the UK saw employment better than forecast yesterday.
NZ Housing Issues Could Replay in Australia
Housing has been problem for New Zealand and also for the Reserve Bank of New Zealand. Low interest rates and stimulus have helped to fuel a housing boom and this is playing out with some of the country seeing their career in turmoil.
The New Zealand central bank would normally raise interest rates, but the economy is still in a fragile place. The government has now decided to take action through legal avenues and property investors will now lose the ability to deduct mortgage interest from their taxable income. The move saw the New Zealand dollar selling off as highly leveraged investors will suffer.
For Australia, the country finds itself in the same boat with lending and house prices at a high as investors rush out to buy property because the RBA has said that interest rates will stay at 0.1% until 2023.
The RBA can’t let the situation continue as it is and will maybe find themselves having to take action in the same was as the New Zealand policymakers did. Taking aggressive housing action will see a drop in the exchange rate as investors pull away from the country.
Aussie Billionaires Skip the Downturn
Australia’s billionaires have skipped the economic downturn with data showing an increase in their personal wealth.
The Bloomberg Billionaire’s Index reported that the nation’s wealthy saw their fortunes rise by 86% compared to one year ago. Big jumps in commodity prices have seen the fortunes of mining magnates like Gina Rinehart and Andrew Forrest double since 2020.
The AUD to GBP rate is holding steady in the current range after economic data this week. The UK saw employment better than forecasts with a move lower to 5% in unemployment, while inflation came in at half the expected number with a 0.4% reading. Retailers in the UK have been slashing clothing prices in order to shift large amounts of stock and this is driving down prices in the country’s stores. John Lewis announced in its latest earnings report that it would be closing 5 of its flagship stores as the e-commerce trend and lockdowns bite into profits.
AUDGBP is still trading in a range between 0.55 – 0.5600 and the pair is seeking a catalyst that can create a breakout to a new longer-term trend.
If you have a currency exchange involving the Australian dollar coming up, you can get in touch to be kept up to date with the latest market movements likely to impact your rate.