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The Australian dollar has been struggling recently against the pound owing to a number of different reasons. The wildfires have caused a huge amount of damage to the country and this is likely to have a knock on effect on the economy. According to Katrina Ell from Moody’s ‘the risk of there being broader macroeconomic spillovers this season are high given the scale of the fires.’

Also, the chances are increasing that the Reserve Bank of Australia (RBA) will look to cut interest rates when they hold their next meeting on 4th February. Economic data has been mixed during 2019 and the RBA has already hinted that it may look to make further cuts to the interest rate.

The Australian dollar has also weakened recently over the unrest in the Middle East. As a commodity based currency the AUD can often be adversely affected by geopolitical uncertainty. The currency can often be sold off as investors view the Australian dollar as a riskier based currency. Investors will then typically move money towards safe haven currencies including the US dollar, Swiss franc or the Japanese yen. This can be evidenced when looking at what has happened to those three currencies over the last few weeks.

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