The suggestion that the reserve Bank of Australia may make further interest rate cuts in the months ahead is weighing on the value of the Australian Dollar. So too is the slowdown in Chinese economic activity.
Also influential is the change of heart amongst international investors who are less inclined to buy into the high yielding interest rates that Australia offers because they are fearful of events in Europe undermining the Aussie Dollar and causing them to lose money in exchange rate movements.
In essence, having driven the weakening Aussie Dollar to the highest level since last October, the Pound lost some of that momentum and dropped three cents. It looks set to fall a little further and we are likely to see A$ 1.56 before any turnaround in this short term decline.
Events in Europe are strengthening the Pound but the Aussie Dollar is largely powered by investor sentiment and investors are fickle beasts so we should not be convinced by any of these spikes and troughs until they breach significant technical levels.
That hasn’t happened on either the upside or downside in the Sterling – Australian Dollar exchange rate so, it is best to plan using A$ 1.56 and A$ 1.62 as your outer limits in the short term.
Thanks to the folks at halofinancial for providing this analysis