John from Moneycorp

The UK Pound V Australian Dollar

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mc-logo2.pngI have received many messages recently on the pound against the Australian dollar – below is further information on what could shape the exchange rate over the next few months.

For GBP/AUD, the trend is currently towards a weaker Aussie dollar.

The exchange rate, in the short term and what will happen next, is currently dependent mainly on the following factors:

Eurozone situation – The Greek situation in particular causing investors to shun high yielding ‘riskier’ assets, which has proved to be negative for the Aussie dollar. The British pound on the other hand has benefitted from a relative safe haven status having retained its AAA credit rating, resulting in a flight away from the beleaguered Euro and into sterling and UK Government bonds, resulting in a higher GBP/AUD$ rate of exchange which means it is better for those converting their pounds into Aussie dollars) – if the Eurozone situation continues to deteriorate, this is likely to further weaken the Aussie dollar.

Interest rates - Having seen the Reserve Bank of Australia cut its interest rate from 4.25% to 3.75% in April, the high yield advantage is now being eroded. Australia’s Prime Minister Julia Gillard has also recently stated that her government will return the budget to a surplus during the next fiscal year providing scope to adjust interest rates. Some analysts are predicting another interest rate cut in Australia soon, maybe as early as June, which again could be negative for the Australian dollar.

China - Australia’s largest trade partner China has seen a considerable slowdown in economic growth recently with the most latest GDP reading down to 8.1% annualised from the previous result of 8.9% in the final quarter of 2011. Their decline in growth rate will undoubtedly dampen their previously insatiable demands for Australia’s natural resources. Considering that the Australian economy has been driven by its mining boom, the recent RBA decision to cut has been well received with the aim to help stimulate some form of domestic growth.

Any data released in the Australia and the UK, of course, could have an impact on the exchange rate – much is dependent on what happens in these factors above in relation to the exchange rate over the next few months.

Thanks

John

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Moneycorp

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The Australian dollar remains weak as political turmoil continues in Greece.

 

Given the uncertainty in Greece, relating to their political situation, financial markets are particularly nervous at the moment and this does not help risk sentiment – therefore, the Aussie dollar is negatively affected and is weaker as a result.

Edited by John from Moneycorp

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The Australian dollar remains weak due to continuing fears on the European debt crisis.

 

Whilst Greece has dominated the headlines recently, ratings agency Moody's added to the negativity surrounding the Eurozone after it downgraded the debt ratings of 16 Spanish banks early on Friday.

 

There is so much uncertainty within financial markets at the moment and this makes the Aussie dollar weaker.

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boganbear    212

I understand your explanations for the weakening of the Aussie dollar but do not understand why it should be affected so much by the Greek situation and why it is not considered a safe haven.

 

Aussie government debt is very low compared to the other major world economies, the banks are pretty sound and as far as I know, do not hold much Greek/Euro debt and have not had to be bailed out like RBS/Lloyds/Northern Rock. The Aussie economy does not rely on trade with the EU and although interest rates have fallen recently, they are still a lot higher than in the UK. The resources boom has been the saving grace for the Aussie economy over the last few years but it is not as if these resources are going to disappear into thin air. The Commonwealth government is determined to get back to a budget surplus asap and live within its means, the economy and budgets seem to have been much better managed generally for many years and unemployment compared to the UK is very low.

 

My economic knowledge is not great but Australia seems to be in better economic health than the UK and other major economies so why is the dollar and the stock market weakening so much when there is more going for Oz compared to elsewhere?

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Guest The Ropey HOFF   
Guest The Ropey HOFF

Is the dollar gonna go up to $2 to £1 ?

 

It says the pound is stronger against 80 major currencies, why i have no idea, but heres hoping one of the 80 is Australia.

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A key factor for the Australian dollar is the Eurozone situation – because of the current risk aversion attitude around the globe stemming particularly from Greece, this is negative for the Aussie making it weaker recently.

 

The Aussie dollar is affected by “risk sentiment” in that investors are unlikely to invest in the currency when there is global uncertainty.

 

Currencies like the Aussie, NZ dollar and the Canadian dollar are more linked to global growth therefore when there is worries about the world this can have a negative impact.

Edited by John from Moneycorp

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Jzombie    10

Thanks for this John. Would be good to hear an update later. Your post is pretty much what I'd been thinking. Here's hoping for further rate improvements!

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The Australian dollar is more steady as “risk sentiment” has improved – for now, news from Europe and in particular Greece, has subsided. Also, helping the Aussie dollar, a survey by the Housing Industry Association showed a rise in home sales in April.

 

For the UK – the International Monetary Fund (IMF) are concerned over the growth prospects in the economy. We have seen the Aussie dollar weaken due to the problems in the Eurozone but while the crisis continues, independent actions by the collation Government can only do so much as Europe is a key trading partner for the UK - there are concerns the UK could be considerably impacted should the problems in the Eurozone worsen.

Edited by John from Moneycorp

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devon67    44

do you think it will go up to about 1.8$ to the £? in the next few months as im about to transfer some money

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do you think it will go up to about 1.8$ to the £? in the next few months as im about to transfer some money

 

The exchange rate, and where it goes in the short term, is dependent on a few key factors.

 

The Eurozone crisis and crucially whether Greece has to leave the euro – this could have a negative impact on the Aussie dollar making it weaker. Along with Greece, there are problems in Spain causing concern at the moment regarding the solvency of Spanish banks. When there are concerns over the global economy this affects “risk sentiment” and usually has an adverse impact on the Aussie dollar.

 

Interest rates in Australia – any further cut in rates would likely see the Aussie dollar weaken.

 

Chinese economy – China is a key trading partner for Australia therefore if they were any growth problems in the region then this could push the dollar weaker.

 

Along with these factors, local data released which is perceived to be positive/negative will have an impact on the exchange rate. As I mentioned in a previous post, the UK faces problems of its own as it is also impacted by the Eurozone debt crisis.

 

If you need to transfer money over the next few months, it is worth considering the different methods available when buying your currency – for example, these can allow you set to a target exchange rate at which, if this rate is achieved, your currency will be bought automatically (helping you to take advantage if there is a favourable movement in the rate).

 

Thanks

 

John

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paulhug    138

So John, what the hell is going on? Poor economic news from australia, poor news from china, billions knocked off the ozzie stock exchange yesterday and today the interest rate is cut again, but the $ is strengthened against the £?? Baffles me pal!

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The Australian dollar has strengthened quite considerably against the pound over the last few days.

 

Even though there was a cut in interest rates, the cut (25 basis points) was not as big as some expected. Also, the Aussie dollar has benefitted from some positive data released – this includes the Australian GDP figures which was significantly better than expected. The Australian Bureau of Statistics figures showed strong mining investment and consumer spending (which resulted in a rise in gross domestic product).

 

The pound has suffered due to poor data which came out at the end of last week – British manufacturing activity shrank at its fastest pace in 3 years in May therefore this was negative for sterling. It is worth noting that the problems in the eurozone is also bad news for the UK which has strong trade links with the region.

 

The next couple of days sees Australian employment figures released and UK services PMI.

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The pound has started today slightly better against the Australian dollar.

 

The Aussie received an initial boost yesterday following the news that China was lowering its benchmark interest rate by 25 basis points to 6.31%. Initially, the cut was beneficial to the dollar, but this did wear off as there was a feeling from investors that this could have beena possible last-ditch effort to prevent further slippage in the economy.

 

The Aussie also did not benefit from comments the US federal Reserve chairman made – he did not mention any further plans to stimulate the US economy therefore creating “risk off” sentiment.

Edited by John from Moneycorp

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Jambos    10

With a gradual slow down from the likes of China & Japan some of Australian biggest trading partners and other areas of the Australian economy not fairing so well. I would imgagine Oz interest rates have further to fall which ultimately could mean a fall in the dollar. The next few weeks could be interesting as the Euro pot begins to bubble up again! We are looking to exchange GBP to AUD in the next 12-18 months and would be very pleased if we reached 1.8!!

 

Just remember it's not that Australia is doing particularly well. Its a relative position to how badly we are doing. Not sure if things can get much worse for the UK we are already bankrupt. (Famous last words) While Oz has potential to get a lot worse. Oz also has a potential housing bubble that is already beginning to deflate! I would imagine that the ex-rate has further to run!

 

 

Any predictions on the £ to AUD over the next 12-18 months? Are there any people out there who provide longterm forecasts / guestimates!

:angel_happy_face_ha

My dream would be $2=£1. What would your predictions over the next 12-18 months be?

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Jambos    10

With a gradual slow down from the likes of China & Japan some of Australian biggest trading partners and other areas of the Australian economy not fairing so well. I would imgagine Oz interest rates have further to fall which ultimately could mean a fall in the dollar. The next few weeks could be interesting as the Euro pot begins to bubble up again! We are looking to exchange GBP to AUD in the next 12-18 months and would be very pleased if we reached 1.8!!

 

Just remember it's not that Australia is doing particularly well. Its a relative position to how badly we are doing. Not sure if things can get much worse for the UK we are already bankrupt. (Famous last words) While Oz has potential to get a lot worse. Oz also has a potential housing bubble that is already beginning to deflate! I would imagine that the ex-rate has further to run!

 

 

Any predictions on the £ to AUD over the next 12-18 months? Are there any people out there who provide longterm forecasts / guestimates!

:angel_happy_face_ha

My dream would be $2=£1. What would your predictions over the next 12-18 months be?

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Perthbum    2,621
do you think it will go up to about 1.8$ to the £? in the next few months as im about to transfer some money

No one as a crystal ball Devon, no oe can see the future, it is all guesswork which has got us all into this mess.

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stevemalbec    104

Dollar surges back above greenback parity

 

June 11, 2012 - 10:50AM

 

The Australian dollar jumped back above parity with the US dollar after Spain became the fourth European country to receive a bailout since the region’s debt crisis erupted about two years ago.

 

The dollar, which briefly snuck above the US100-cent mark last week, rose as high as 100.08 cents in morning trade, before dropping back to trade just below parity. The dollar’s gain since Friday’s close is about 0.8 per cent, with trading thin because of a public holiday in most of the country to mark the Queen’s birthday.

 

It’s been a remarkable rebound for the currency since early last week when it sank towards 96 US cents. Since then, Australia rolled out a string of positive economic news and the Reserve Bank cut its interest rate by less than analysts had expected.

 

The local news combined with relief on international markets that Spain’s risk to the eurozone would be contained, luring investors back to assets deemed to do well in faster economic growth such as the Australian dollar.

 

Spain's banks are to receive 100 billion euros ($126 billion), adding Spain to the list of eurozone nations to receive bailout support that now includes Greece, Portugal and Ireland.

 

“Markets were wondering whether Spain was going to drag on for another month or two,” said Imre Speizer, a strategist in Auckland for Westpac.

 

The dollar is also higher against other currencies. It was buying 79.4 yen, 78.9 euro cents, 64.2 pence and $NZ1.287.

 

Read more: http://www.smh.com.au/business/markets/dollar-surges-back-above-greenback-parity-20120611-204yf.html#ixzz1xRUdUoU7

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The Australian dollar remains strong at the moment.

With the Greece elections on Sunday dominating the focus, there is currently a feeling of ‘calm’. There were also comments from the G20 overnight suggesting banks could put money into the markets if it all goes wrong after Sunday’s election and this has put markets at ease.

In his Mansion House speech last night, the Bank of England Governor Mervyn King said quantitative easing (QE) could be needed again to stimulate growth in the UK economy (the mention of QE can have a negative impact on a currency).

Following Sunday’s election in Greece, depending on the result, we could see exchange rates worldwide impacted.

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Jambos    10
The Australian dollar remains strong at the moment.

 

With the Greece elections on Sunday dominating the focus, there is currently a feeling of ‘calm’. There were also comments from the G20 overnight suggesting banks could put money into the markets if it all goes wrong after Sunday’s election and this has put markets at ease.

 

In his Mansion House speech last night, the Bank of England Governor Mervyn King said quantitative easing (QE) could be needed again to stimulate growth in the UK economy (the mention of QE can have a negative impact on a currency).

 

Following Sunday’s election in Greece, depending on the result, we could see exchange rates worldwide impacted.

 

In the event that the Anti- Austerity Party win the day in Greece would we not see the pound strengthen against the AUD even if it be a temporary adjustment (Spike). If so what could that look like? It's such a mixed up situation with so many volatile variables and potential outcomes I imagine forecasting the relationship between the AUD & GBP is near impossible. I am looking to exchange GBP for AUD over the next 18 months!

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The news from Greece is that the New Democracy party will attempt to form a Greek coalition government, with other parties backing the international bailout, after a narrow election victory which eased fears of a sudden exit from the euro. Financial markets have reacted positively but attention will now be turned to see how quickly a new government can be formed.

 

The result has greatly reduced the chances of an imminent Greek exit from the euro.

 

As the situation is stable for now, the Aussie dollar remains strong against the pound.

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The Australian dollar remains strong - this is following the minutes released from the Reserve Bank of Australia’s (RBA) meeting – it was suggested that unless something drastic happens, there is unlikely to be another interest rate cut in the short term.

 

There is also speculation that the Federal Reserve in the USA may opt for additional quantitative easing – a move which could further boost the Aussie dollar.

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