The Australian Dollar continues its negative trend ahead of Super Thursday from the Bank of England. GBP/AUD briefly touched 1.76 marking an 8 month high for the currency pair. A number of factors continue to drive the Australian Dollar lower at present. Signs of a slowing Chinese economy and concerns for Trump tariffs are driving commodities lower.
When China sneezes, you can be sure Australia will catch a cold.
It’s not just weaker commodities and a slowing Chinese economy that are weighing heavily on AUD, whilst not new news, their huge housing bubble crisis in Melbourne and Sydney raises alarm bells, with high debt a major problem amongst consumers.
Global risk a major factor
As a commodity currency, the Australian Dollar tends to fair well when commodity markets are bullish and global risk is lower. As it stands, commodities are dragging their heels with iron ore – one of Australia’s biggest exports – now expected to post further declines in the coming months.
Something seems off about the recent trend however, safe-haven currencies are lower (The Yen and Swiss Franc are both weak), and considering political tensions are building in North Korea, China, Russia and the US, the currency markets currently their sporadic nature.
Super Thursday – what to expect?
The Bank of England’s latest interest rate decision is likely to be a non-event, only one member voted in favour of a hike last time round and with inflation set to calm down in the UK, an imminent rate hike looks unlikely.
That being said, there are plenty of reasons to remain bullish towards the UK economy, the latest Retail Sale figures and Manufacturing PMI took a turn for the better this week, which sets the scene for stronger growth forecasts from Mark Carney.
Personally, I envisage GBP/AUD trending above 1.80 next week, with Brexit woes now fading and with much of the spotlight on the Australian economy investors look set to favour Sterling over the Aussie.