Hi All,

Here is an update of what’s been happening in the Currency Markets throughout October with the Aussie Dollar.

The start of the month saw retail sales recover strongly (+0.9%) from the previous month’s disappointment, fuelling AUD buying (resulting in a 13 month high for AUD/USD) on the expectation of future RBA (Reserve Bank of Australia) monetary tightening.

The biggest news in October was the decision by the RBA (Reserve Bank of Australia) to hike rates by 25 basis points (3.25%). The early move to start to ‘normalise’ monetary policy is the first among the G20 countries and looks to be the first of a series of increases that will see rates back to 4.50 by mid-2010. The RBA decision was vindicated by the subsequent release of employment data that showed full-time employment growing by 35,400, reversing a 30,800 fall the previous month, and the Unemployment Rate dropping to 5.7% from 5.8%.

NAB (National Australian Bank) Business Confidence (+14) fell back slightly in September from the previous month but firms remained upbeat about future prospects. The survey was completed before the RBA (Reserve Bank of Australia) hiked interest rates for the first time in 19 months (from 3.00% to 3.25%), with stronger sentiment in construction unable to fully offset the weaker manufacturing, wholesale and retail sectors. Westpac Consumer Sentiment (+1.7% m/m to 121.4) also reflected generally improving conditions as rising shares, an improving labour market and a strong AUD more than offset the prospect of higher interest rates.

Last week saw the NAB (National Australian Bank) Business Confidence Index surge from -4 to +16 in Q3, as companies reported an increase in trading, profits and forward orders; these levels of optimism have not been since early 2002 and prospects for solid growth of 2% in 2010 are steadily improving.

Headline Consumer Prices (+1.0% m/m) rose by more than expected in Q3 as utility and fuel prices jumped. The annual pace of CPI actually slowed to the lowest since 1999 and at 1.3% is comfortably inside the RBA target range of 2-3%.

Update: The RBA (Reserve Bank of Australia) yesterday Increased rates by a further 25 basis points to 3.5%.

Current Central Bank Rates:

Australia (Reserve Bank): 3.5% (Next meeting 1st December)
UK (Bank of England): 0.50% (Next meeting 5th November)

GBP/AUD Highs & Lows of October:

High: 1.8472
Low: 1.7330

A movement of: 6.59%

Difference this would make on £200k

High: 369,440 AUD
Low: 346,600 AUD

A difference of 22,840 AUD.

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.


Jon Sermon