The Pound has seen its value rise against the AUD during Monday’s trading, hitting 1.7755 at the high. This is almost a cent higher than the pair was trading earlier today, although any continuation of this trend is likely to be heavily influenced by Thursday’s Bank of England (BoE) interest rate decision and subsequent monetary policy statement.
In truth, the Pound has struggled to sustain any gains against its Australian counterpart of late. Even if Sterling were to gain further support up towards 1.80, a seemingly key resistance level for the pair at present, it is likely that the AUD will find plenty of support around the threshold.
Investor confidence in the UK economy remains almost non-existent and this in itself is handicapping any major advances for GBP. It seemed as though the markets may react positively to UK Prime Minister Theresa May’s announcement that she would be taking the lead on Brexit negotiations, following the resignation of Chief Brexit negotiator David Davis. The Pound certainly seemed to gain foothold but with reports that the EU have discarded her current approach agreed at her recent Chequers meeting, the Pound may once against struggle to make any significant inroads against the AUD this week.
The current market is proving extremely difficult to dissect, with so much uncertainty over the UK’s current Brexit talks sapping investors’ risk appetite for the Pound. Similarly, with global trade slowing, and President Trump’s trade tariffs having a negative impact on Chinese economic growth, the outlook for the Australian economy is also a cause for concern.
Australia relies heavily on the export of its raw materials to China, so any slowdown in demand is likely to have a negative impact on the Australian economy and ultimately the value of the AUD.
We also need to consider that the current global economic climate means that investors’ risk appetite is low and when this is the case they will usually move their funds away from the riskier commodity based currencies such as the AUD and back into safer havens such as the USD or CHF.
All of this adds up to an extremely uncertain market, with investors concerned over both the UK and Australian economy to some extent. This means that clients with an upcoming GBP/AUD currency requirement may wish to protect their positions where possible and eliminate the risk of any significant downturn. If you would like to discuss any of the above, feel free to email me using [email protected].