The Australian Dollar has had an interesting couple of days, with drops against the Euro and Pound Sterling as markets deemed recent comments from both Mario Draghi and the Bank of England as positive to monetary policy for the EU and UK.
It’s not all bad news though, the GBP/AUD spikes that were expected following the UK snap election have obviously not materialised and anyone looking to buy Australian Dollars with Pounds was left feeling disappointed, and it looks like Aussie Dollar strength could be on the horizon.
Australian economy becoming more robust
Despite a slow start to the year, with retail sales slowing and housing construction falling, the Australian economy is looking like it could be improving. Chinese demand for Australian raw materials tends to dictate the strength of the Australian Dollar and the recovery in the price of iron ore along with increased demand from China as new construction projects begin is helping the AUD’s value.
Reported “tightening financial conditions” in China could be a worry and could negatively impact the value of AUD, however I agree with the comments from UBS that, “China is not the only market for Australian goods and the backdrop of wider global growth is expected to support the Australian Dollar”.
The direction for the Australian Dollar could be influenced by the key interest rate decision from the Reserve Bank of Australia (RBA) next week. The RBA are expected to continue to hold interest rates at 1.5%, as they have since last August, which could see the Australian Dollar strengthen slightly.
GBP/AUD exchange rates
For those looking to buy Australian Dollars with Pounds it is worth considering a move this week. The Pound is up against the Australian Dollar currently, but the AUD could rise next week and there is always the danger of some news concerning Brexit negotiations hitting Sterling’s value.