Australian Dollar goes from strength to strength

7 August, 2012

Tom Arnold

Today is a busy day for data releases both in the UK and Europe with various pieces of industrial and manufacturing data due out at both 9.30am and 10.00am. Recently these figures have been fairly negative for both areas, so if you have a GBP or EUR requirement then let your account manager know and we can keep you abreast of developments.

Overnight the big news was that the Reserve Bank of Australia kept their interest rate on hold at 3.50%. In light of the RBA’s decision, I thought a bit of a focus on the differing situations the two currencies find themselves in might help those of you with requirements to send money to Australia.

Initially the first observation is that GBPAUD exchange rates are at their lowest levels ever. Maybe not quite the exact low point, but certainly in that region, and they have been here now for the better part of two years. Why?

Well there are a couple of factors, but the overwhelming one is that Australia has ridden the 2008-present worldwide economic crisis significantly better than the rest of the world – this is mainly due to a lack of exposure rather than better decision making, but nevertheless they have been less affected, and therefore their economy has been performing better than most others, giving their currency a better platform to succeed. This success has mainly be gained through a higher local interest rate. If you are a global investor and you have billions of currency units to invest, then a relatively stable economy with a higher interest rate is an ideal destination for your funds. With this investment in the Aussie Dollar, it gains strength and hence drives down buying rates as we have seen with GBPAUD.

What’s to come? For those of you looking to buy property in Australia, and/or take the plunge and move down-under, there is not much chance of a turnaround in this situation I’m afraid – the Australian economy is still performing well, specifically it’s housing market and retail sales figures. However, consumer concerns are increasing as the global slowdown continues, and the local unemployment figure seems to be on the up as well. So all is not completely rosy, and critically there is also talk of a possible interest rate cut in the coming months. So a bit of improvement in GBPAUD may be on the horizon…

On the Olympic front however Team GB is annihilating the Aussies in medal terms and things seem likely to continue with GB boxers and cyclists continuing where the rowers, sailors and athletes started. Nowhere will this be personified more intensely than in the potential final of the women’s sprint in the velodrome this evening between GB’s Victoria Pendleton and Australia’s Anna Meares – the fiercest of rivals for many years, swapping world championships between the two of them, this will be their final tussle for gold – who will win?

Here’s hoping Vicky keeps the trend of GB dominance going, but Anna will certainly be hoping to take a lead from the Aussie Dollar in crushing her GB opponent.