Why is the AUD struggling?
Both AUD and GBP are not performing well at present. The Australian dollar has been suffering against the majority of major currencies, predominantly due to the US/China trade war.
Australia is heavily reliant on China purchasing its goods and services and due to this any slowdown in growth has a knock on effect on Australia. It looks as though the trade war could be lengthy and the threat of huge tariffs from both sides does not bode well for the Australian dollar.
There are rumours circulating from the Reserve Bank of Australia (RBA) that there could be a further interest rate cut next month. There was recently a cut to 1.25% and a further cut would no doubt cause AUD weakness.
Brexit hurting Sterling
I am of the opinion that Britain’s woes currently outweigh that of Australia however. The UK has no PM and we are in complete Brexit Limbo. Political uncertainty and economic uncertainty always hurt the currency question. Boris has stated he will bring a no deal scenario back to the table in order to try and negotiate a better deal with Brussels.
Something many seem to be neglecting is that Brussels have stated on many occasions the deal will not be changed. They do not want to us to leave with a favourable deal as other nations would no doubt also wish to leave the club. Italy for example have just been threatened by Brussels with a €3bn fine due to excessive debt.
Boris stated the following this week, “We are getting ready to come out on 31st October. Come what may. Do or die.” The higher the probability of a no deal I would expect the weaker the pound to become.
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