AUD to GBP exchange rates – Time to buy?

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UK Sterling / Australian Dollar currency exchange rate

AUD to GBP trends -Click for larger image

We were all hoping to see the RBA cut interest rates before the end of 2011 and our patience was rewarded on Tuesday when they cut rates by 0.25% to 4.5%. Obviously the Aussie weakened as a result, and the market began speculating on whether there would be an additional 0.25% in the December meeting.

Last night they reduced their forecasts for growth, a stark difference in the tone from the previous quarters outlook, down from 4% to 3.25% for this financial year and down from 3.75% to 3.25% for next. Inflation forecasts were downwardly revised to 2.5% until June 2013 from 3-3.25% back in August.

They are forecasting higher unemployment and faster than expected falls in Australia’s commodity prices. The global economic instability is weighing on global growth which in turn is affecting Australian growth.

China could have a positive effect if they embark on further economic stimulus to soften the blow but already Australia is experiencing a slowdown in trade due to the European sovereign debt crisis. China’s manufacturing sector growth eased last month, with the official purchasing mangers’ index (PMI) dropping to 50.4 from 51.2 in September. This is the first time in 3 months that the reading has fallen and is a 32 month low.

Technically GBPAUD found support bang on the previous September low at 1.4998 and started this week strongly making 5 cents back – currently running out of steam at 1.5515 (which coincides with the 38.2% retracement of the fall from 1.6350 to 1.5000). With the G20 over the weekend; with the IMF lining up to pump more money into the Eurozone if they can agree the EFSF terms 1.55 might cap it.

But on the other hand, the potential for EU disappointments, the possibility of an RBA rate cut in December may be enough to push the currency pair up towards 1.60 again. If we do get through 1.55 and clients wish to target 1.60 levels, it may be wise to position a stop loss order below 1.55 to catch it if momentum fails before a move back to 1.5000

Thanks to Halofinancial for this review of the latest exchange rate data.

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Comments

  • Dulong Ttil
    Reply

    Japan has adopted an assertive Monetary Easing Policy, which drives the YEN downwards successfully. The immediate result shows that their Export and Tourism industries have picked up swiftly. Japan is now enjoying healthy export growth and has much more tourists visiting Japan.

    With the sound and robust stimulation by Japan’s Monetary Easing Policy (which in fact mainly injecting more printed notes into the market by their Central Bank), the Nikkei has soared from 10,398 to 16,291 just in 2013. Nikkei marks its best performance in forty years, and also the top performer among Asian markets in 2013. Analysts name this “Nikkei Ends Year on a High in Quiet Asia”. Can we see the power of an aggressive Monetary Easing Policy now?
    Australia can consider this as a viable option to improve our economy outlook and, our export can be improved instantaneously.

    A lower $A can help to improve our Export opportunities and save the Australian manufacturers.

    Another though is to engage a linked currency with USD, (e.g. A$1:US$0.80), which can give overseas investors good confidence in our economy stability.

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