The Australian dollar has taken losses this week, falling to its lowest level against sterling this month and its lowest level in two months against the US dollar.
The Australian dollar sell off has pushed GBPAUD to within four cents from the yearly highs. The Reserve Bank of Australia (RBA) has hinted at cutting interest rates due to a down turn in the Australian economy. The RBA have been reluctant make any change due to the potential impact to the already overheating property market, particularly on the East coast.
There has been disappointing inflation data this week, Consumer Price Index (CPI) data is a key measure of inflation and as such can move the markets. The CPI figures came in away from expectations which sparked a sell off of the Australian dollar as this could influence monetary policy and giving further justification for an interest rate cut.
For over three years inflation levels have been below the RBA’s 2-3% target and this week’s figures were the lowest reported in the last 16 years which is why we have seen a drop in AUD as the markets react to a higher probability of a rate hike.
The next release that has the potential to cause volatility will be Thursday’s manufacturing Purchase Manager Index (PMI) data. This will cover the outlook and sentiments within China from various key private manufacturing companies. The influences the Australian dollar due to Australia’s heavy reliance on the China purchasing its exports, in particular iron ore. Any slow down in Chinese growth has a nock on effect to Australia.
Brexit however will remain a key driver. The UK is currently in Brexit limbo with May trying to put a mutually acceptable deal together that both Labour and Conservative Parties are happy with. This is a tall task when you consider each party can’t even agree on a suitable deal in house.
Brussels also continues to stone wall us and the Deputy spokeswoman for the European Commission this week made it clear the deal presented is the only deal and there will be no amendments, something it seems May is relying on. Despite the problems down under, until we have firm, significant news on Brexit the pound is likely to remain fragile.
During such unpredictable times you can benefit from having an experienced broker on board on hand for support, who can make you aware in the event of changes in the market that could impact your return. If you have a pending currency transfer, feel free to let me know the details of your trade I will be happy to assist. If you would like a comparison with your current FX provider I’ll be happy to provide one.