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John from Moneycorp

The Pound vs Australian dollar

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The Reserve Bank of Australia cut its policy interest rate on Tuesday to an all-time low of 2.5%

 

The Reserve Bank of Australia's (RBA) decision to cut its Cash Rate from 2.75% to 2.5% was widely anticipated – in their statement, the RBA's failure to hint at a subsequent cut, and the tone and sentiment of the comments from RBA governor Glenn Stevens was enough to make the Aussie dollar slightly stronger against most currencies.

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The Australian dollar has strengthened after strong July trade numbers from China – the numbers were better than expected.

 

China is Australia's main export market therefore any economic data released can affect the exchange rate.

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The latest Aussie dollar review is below - thanks

 

The Aussie dollar was the top performer among the ten most-actively-traded currencies. It strengthened by nearly four cents against the pound and by five against the euro.

 

The Australian economic statistics were adequate rather than spectacular. House prices were up by 5.1% in the year to June and unemployment was steady at 5.7%. Paradoxically it was an interest rate cut by the Reserve Bank of Australia that sent the currency higher. The Cash Rate reduction from 2.75% to 2.5% had been widely expected and the RBA indicated it had no plans for any further cuts.

 

Sterling was unable to keep up with the rebounding Aussie but the UK news and numbers were positive for the pound. The services sector reported the quickest expansion since 2006 and manufacturing and industrial output both delivered healthy increases. The Bank of England's long-awaited "forward guidance" revealed that the Bank Rate would only stay low as long as inflation remained in check.

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Mmmm, AU$ has suffered again overnight losing 0.75% against £. There is also significant flight away from nearly all developing markets with Ind Rupee at levels I have not seen since taking a slight interest 10 years ago. It would seem the strengthening US $ is drawing investment away from most markets with UK £ also holding firm given recent financial and jobs data. Both are considered solid traditional havens for investors.

 

Not all bad news as AU$ seemed to be significantly over valued such that this resetting will make investment and purchases from AU much more attractive including China who keen promising multi billion $ investments in rail etc.

 

S

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Latest Australian dollar review is below, thanks.

 

The Aussie was on the back foot for most of the week as the developing situation with Syria saw investors heading for risk adverse assets. The currency started the week near the 0.9050 AUD/USD level and fell slowly through the early part of the week to reach a 3 week low of 0.8893 by late Tuesday.

 

A bounce saw it rise to 0.8980 before settling a little lower by the end of the week. Against Sterling it fell to 1.7440 before rallying a little but the Aussie remains under pressure due to the weak fundamentals and the flight to quality.

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Good news for the UK this morning – construction activity grew at the fastest pace in nearly six years in August, in another sign that the economic recovery in the UK is gathering pace.

 

There has also been some positive news for Australia which has boosted the Aussie dollar. Australia reported better-than-forecast growth numbers for the April to June quarter. Gross domestic product (GDP) expanded 2.6% during the quarter, from a year earlier.

 

The Aussie dollar has also been stronger against the pound following the RBA statement earlier this week which did not signal any further interest rate cuts in the short term.

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The Australian dollar is slightly stronger this morning following the Liberal-National coalition winning the Australian election.

 

Also, data from China showed that exports rose more than expected in August to 7.2%. Worth keeping an eye out on further data released from China tomorrow - Chinese industrial production figures and retail trade for August are due out on Tuesday.

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Interesting comments from Chancellor George Osborne yesterday – he said in a speech that the UK economy is “turning a corner”.

 

He appeared to be directing his speech at his opponents, particularly the Labour party, who have been critical of the coalition government’s austerity measures.

 

Time will tell if he has jumped the gun with his bullish comments – there has certainly been some positive signs recently in the UK, however there is still a long road ahead.

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An overview of the currency news over the past month is below, thanks

 

After six months on the retreat the Aussie dollar has been digging in. In early August and again at the beginning of September it touched a three-year low against the US dollar; in late August it rebounded from a three-year low against sterling.

 

Having knocked it 16% lower against the pound and 12% lower against the US dollar from the highs of this spring, investors appear to be rethinking their attitude to the Australian dollar.

 

They cannot be doing so because of the current strength of the Australian economy. The latest surveys show manufacturers and service providers continuing to report declining activity, as they have for more than a year. Business confidence is still hovering at the dividing line between optimism and pessimism. Australia's economy, like Britain's, expanded by 0.6% in the three months to end-June but it could be a struggle to achieve similar growth in the current quarter.

 

But: Economic activity in China is picking up again and the Reserve Bank of Australia looks less likely to take interest rates lower. Both of these factors are important to the way investors see the Aussie. China is Australia's biggest customer, buying iron ore and coal on a grand scale. The global financial crisis and recession dampened China's appetite for Australia's commodity exports but now it seems to be on the rise again. Greater demand for Australia's exports means greater demand for its currency.

 

Partly as a result of that improved outlook, the Reserve Bank of Australia is seen as less keen to lower its official interest rate. In the last 12 months the RBA's benchmark Cash Rate went down from 3.5% to 2.5%. The lower return, together with the threat of more rate cuts in the pipeline, made the Aussie less attractive to investors. Take away that threat though, and the current 2.5% still looks considerably more attractive than the rates of 0.5% or less that are attached to the pound, the euro, the Swiss franc and the US dollar.

 

On the basis of just a couple of week's performance it would be rash to conclude that the Australian dollar's retreat is over, let alone to predict a new strengthening trend. However, anyone needing to buy Australian dollars might want to take advantage of today's prices while they are still there to be had.

 

Even if the Aussie were to continue to weaken, they would still have bought their dollars at close to the cheapest price in three years.

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My house sale completes in just over 3 weeks. Knowing my luck, there will be a massive retrace and I'll get about $1.50 to the pound!

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Guest vikkiann
My house sale completes in just over 3 weeks. Knowing my luck, there will be a massive retrace and I'll get about $1.50 to the pound!

 

You must be getting excited now!

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You must be getting excited now!

 

 

We aren't moving out until January - one more Christmas with family & friends before the big move! I am excited though; spend half my time on the internet researching boats and thinking about the fun we'll have with it! I should really be concentrating on more pressing matters...

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The pound is stronger against the Australian dollar today.

 

There is anticipation, in Australia, that there could be another interest rate cut in the near term.

 

The pound has also reacted well to comments from Bank of England Governor Mark Carney – his personal view is that he doesn’t see a case for quantitative easing stating the UK economy is strengthening.

Edited by John from Moneycorp

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The Australian dollar has been under pressure recently, losing lost more than three and a half cents to the British pound.

Most important to the Aussie's fortunes was the US Congress, where Republicans and Democrats cannot agree on a new spending bill. With no last-minute compromise the US government will have to shut down non-essential services this week. Investors see this as bad for the US dollar and bad for the commodity currencies, including the AUD.

On Tuesday, the Reserve Bank of Australia kept its Cash Rate steady at 2.5% and implied in its statement that it was not planning another rate cut.

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A review of the Australian dollar from the past month is below - thanks.

 

The antipodean duo led the field in September, gaining ground against the world's other major currencies. It was the New Zealand dollar that eventually took the crown, adding two cents against the Aussie, but the performance of the Australian dollar was proof that it hasn't yet given up the struggle. The AUD strengthened by 4% against the US dollar (four cents), 2% against the euro (almost three cents) and by 0.5% against the British pound (three quarters of a cent).

 

The Aussie began September in rather better form than it finished. For the first three weeks of the month it looked as though it really would confound the pessimists who had condemned it to a continued erosion. In the process it almost regained the levels last seen in mid-August. But the rot set in once again and at the time of writing, in early October, the Australian dollar was within a cent of a three-year low.

 

Most of the statistical evidence offered a confusing mix of positive and negative news from the Australian economy. Business confidence improved but business conditions deteriorated. New motor vehicle sales were up in August but the increase was not enough to wipe out the previous month's decline. The same was true of new home sales, where the rise in August was smaller than the fall in July. An unmistakably bad set of employment figures showed fewer people in work and more on the dole. Two weeks later an unmistakably good set of manufacturing figures showed growth returning to the sector for the first time since February last year.

 

Ecostats aside, the Aussie's main driver in the last month was investor sentiment; not just sentiment about the AUD itself but the general attitude to life, the universe and everything. During most of September investors were optimistic, helped by America's non-invasion of Syria, by the improving economic performance of Australia's biggest export customer, China, and by the Reserve Bank of Australia's hint that it was not teeing up another interest rate cut. At the end of the month however, investors were worrying about political problems in Washington and Rome that had negative implications for the US dollar and the euro, and therefore for a large chunk of the Western world's economy.

 

It will probably not be until the US Congress gets its sorry act together that the Aussie will again behave as a free agent, and on current form that could take weeks, not days. In the meantime the Australian dollar is likely to react to political developments in Washington at least as vigorously as it reacts to economic developments in Australia.

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The Australian dollar had a good week against the pound.

 

Why?

 

The Aussie was one of the top performers last week, strengthening by a cent and a quarter against the pound. It received help from news of stronger-than-expected Australian retail sales and purchasing managers' index (PMI) readings.

 

Another boost came from the Reserve Bank of Australia, which kept its Cash Rate steady at 2.5% and implied in its statement that it was not planning another rate cut.

Edited by John from Moneycorp

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The latest Australian dollar update is below, thanks.

The Australian and New Zealand dollars both had a good week. For the Aussie it meant a cent-and-a-quarter gain against the British pound, two thirds of a cent won from the euro and a half-cent climb against the US dollar.

As the week progressed investors became steadily more confident that the warring politicians in Washington would not drive the United states over the brink of default by refusing to approve an increase to the "debt ceiling", the aggregate limit on the amount the government can borrow. With that in mind they shunned the safe-haven Japanese yen and reinvested in the allegedly more "risky" commodity-oriented currencies including the Australian and New Zealand dollars. The Australian economic data helped that cause; more than 9k more people found work in September and the unemployment rate fell from 5.8% to 5.6%.

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The Aussie dollar had a difficult week. It lost two thirds of a cent to the US dollar, a cent and a quarter to the pound and two and a quarter cents to the euro.

Why?

Two important influences affected the Australian dollar, both of them occurring on Wednesday morning.

The first, and a positive for the Aussie, was a higher-than-expected 2.2% inflation rate. Investors saw it as delaying any move by the Reserve Bank of Australia to reduce AUD interest rates.

The second event, just a couple of hours later, was a negative. There was a sharp sell-off for all the commodity-related currencies in response to a squeeze in the Chinese money market that pushed up short-term rates. Investors feared that the Chinese authorities were deliberately trying to dampen the economy and, with it, Chinese demand for the exports of Australia, New Zealand and Canada.

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Guest MandiMR2

Good question guspjmh! I'm interested in the answer/opinion too for same reason!

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Recently there have been movements in the GBP/AUD exchange rate based on some of the reasons below.

 

US economic situation partially resolved which helped the Aussie dollar. The Aussie is known as a “risk currency” therefore any possible global economic problems/issues can have an adverse affect on the currency.

 

Chinese economic data – any positive/negative news from China can have an impact on the Aussie dollar. Depending on what is released in the next few weeks, this could have an impact on the rate.

 

Interest rates on hold in Australia – a further cut in interest rates, for example, could weaken the Aussie.

 

What if I need to make a currency transfer soon?

Speak with your Moneycorp account manager, they can provide expert insight on the Australian dollar as and when you need it – they can explain the various ways to buy your currency.

 

These can help you take advantage of any favourable movements in the exchange rate and also protect you if the rate move downwards. Further information on these can be found here - http://moneytransfer.pomsinoz.com/various-ways-to-buy-currency.html

 

Thanks

 

John

Edited by John from Moneycorp

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That was a sit-on-the-fence answer. :biggrin:

 

I'm hoping to hold out until $1.70ish again, but not sure if it will happen by January. I wish the US would hurry up and taper, RBA would lower interest rates and Chinese data goes down the pan for a few months.

 

Too much to ask?

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