Sterling has made gains against the AUD during Thursday’s trading, rising by almost a cent at its high earlier.
Despite this improvement, the AUD continues to find plenty of support around 1.77 as we head towards the end of the trading week. Whether it will hold frim around this threshold is difficult to tell, with both the UK & Australian economy facing their own set of problems.
Political disruption is starting to put a strain on the Australian economy. Infighting amongst the Liberal party is beginning to sap investor confidence and as such, the AUD could find life tough going over the coming days.
Australia is also at risk of being caught in the crossfire of the US-China trade war, which seems to be escalating at a rather alarming rate. President Trump’ trade tariffs have caused a slowdown in Chinese Industrial Production, which in turn is causing their demand for Australia’s raw materials to slow. Australia’s GDP consists of around 30% from Chinese exports. This means that they have a huge reliance on Chinese economic growth, which means any slowdown is likely to hit the Australian economy and ultimately the value of the AUD.
The current crisis in Turkey’s economy is also unlikely to benefit those clients holding AUD. The AUD and other commodity-based currencies have seen their value dip, ever since the Turkish economic crisis. As global risk rises, investors will generally shy away from riskier currencies such as the AUD, again a scenario which could impact GBP/AUD rates over the coming days and weeks.
Of course, the UK has its own set of problems at present. Brexit talks have slowed and this stagnation and chance of a no-deal scenario with the EU, is certainly having a negative impact on the Sterling’s value.
Whether this will be offset by the problems facing the Australian economy is now the key question for investors and any clients with an upcoming GBP/AUD currency requirement. To discuss how these global factors could impact an upcoming transfer get in touch at [email protected].