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2017

Australian Dollar Research Report

Published: Friday 17 November 2017

  • ​​More troubled times for Sterling
  • A mixed bag for the Australian Dollar
  • Guidance for AUD buyers and sellers
By David Johnson

More troubled times for Sterling

Myriad factors have caused Sterling to drop against its major currency pairings this month:
  • the Bank of England’s (BoE) announcement that there were only likely to be to interest rate hikes in the coming three years after an increase from 0.25% to 0.5%;
  • the UK’s recent disappointing inflation results; and
  • continued political uncertainty around Brexit and Theresa May’s cabinet.
These economic events, as well as other global effects from economic and currency strength elsewhere, have put considerable pressure on the Pound in recent weeks.

Inflation remains at a five-year high, but the most recent figures mean that the BoE is unlikely to raise interest rates again anytime soon – and rising interest rates help boost the Pound as they encourage overseas investors seeking more for their money. 
 
 
A mixed bag for the Australian Dollar

The Australian Dollar has had a month of mixed fortunes. Australia’s central bank, the Reserve Bank of Australia (RBA), has kept interest rates the same, as concerns about a strong AUD, the out-of-control housing market and low consumer confidence have weighed on policymakers. A weaker Australian Dollar would help the Aussie exports market. The Australian Dollar fell slightly following RBA’s interest rate announcement, as it looks like Australia will not be raising their interest rates anytime soon, either. This sentiment has disappointed markets, which were waiting eagerly for any hint of future rate hikes.

This all follows political uncertainty for Australia in October, when their Deputy Prime Minister was removed from his post, which weakened the Australian Dollar against major currency partners such as the US Dollar and, indeed, the Pound.

However, events in China seem to be the key drivers of the Australian Dollar, as economic data from China has weakened the AUD on several occasions recently. As Australia and China are tied closely together in terms of exports and imports, any key economic changes in China are keenly felt in the Antipodes, with Australia being the key partner and its currency most at risk. The latest disappointing Chinese retail sales data helped push the GBPAUD rate upwards.

Guidance for buyers

GBPAUD is now trading at a five-month high, with the next upside target coming in at 1.7640 (April 2017 high). It’s probably likely to top out there and correct back down to the 1.70-1.71 level, so consider placing automated orders at the 1.74-1.75 level, depending on your risk appetite.

Guidance for sellers

Look to target the 1.72 level on the correction lower. It may also be worth placing a safety net “stop loss” order above 1.7650. 
 
 
For more information, infographics and the latest currency insights, visit www.halofinancial.com/news