The Reserve Bank of Australia released their Monetary Policy Statement this morning and gave a positive outlook in the imminent future. There has been a pressure release on the supposed housing market crisis in Australia as there has been a record number of residential building permits assigned.
The RBA also announced an increase in the growth and inflation over the next year which has led to some revised optimism about the economy moving forwards. In the very short term however for the currency at least I think the Aussie Dollar could start to lose ground against Sterling. In the last few months several currencies have in my opinion become substantially over valued, none more so than the Aussie. Now that the Brexit deal is going to be negotiated in parliament there could be much more certainty about what’s in store for the UK, this could help Sterling move the GBP/AUD rate back to 1.70.
Chinese effect easing off
The fears associated with the Chinese economy appear to have slightly diminished as the downside doesn’t look as bad as first expected. China being Australia’s biggest trading partner has a major effect on the economy and any sign of economic trouble weakens the Aussie.
Whilst China is certainly not in a red alert stage currently there is always an element of unpredictability about the economy. The Chinese economy produce questionable figures and are very much a borrowing economy. I would always be wary of thinking China is in a positive state but it appears they’re more stable than usual at the present time.
I would certainly consider selling Australian Dollars at the moment whilst the rates at the best level in 3 years. Now there appears to be more boxes that need ticking with the Brexit Sterling could start to gain more ground.