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Currency Update, 10th October, 2022

Outside of COVID which saw the AUD/USD drop as low as 0.55c for a short time, the currency AUD/USD is at the lowest point since March 2009. On Friday the AUD/USD exchange rate closed at 0.6365.


The Australian Dollar fell further even after the Reserve Bank of Australia (RBA) blinked in the fight on wealth destroying high and volatile inflation. Their hike of 25 basis points to 2.60% last week is seen as dovish in light of persistent price pressures domestically and globally.


The AUD is seeing some heavy pressure and the support levels from a technical view are sitting at 0.6320, then after that we are looking at 0.60c. As an importer this is absolutely killing your margins, as an exporter, fantastic! This is where you would look at some forward contracts, even though we see some more gain, if you are able to secure rates at a 13 year high., then the advice is to take it, at least 50-75% of your exposure.


A very concerning time for the AUD, since 2015 we have seen it usually sit comfortably in the 0.70-0.80c range, however there is not much hope right now which means we could be in for some longer term pain.


GBP/AUD


We have seen added pressure on GBP due to the fragile state of UK fiscal policy measures. While the UK government attempts to stabilise bond markets after Chancellor Kwasi Kwarteng’s tax cut announcement, the GBP continues its bearish move. The UK housing market is another area of concern with declining prices likely to accelerate as interest rates rise resulting in lesser demand. Next week puts the UK labor market under the spotlight which has shown a trend of both unemployment and employment decreasing month-on-month.


In the past few weeks we have seen a big swing a huge bungy jump here, $1.74, down to $1.59 then back to $1.74. It has now touched and it sitting around the all important 200 Day moving Average. something to be very wary of and how it reacts from here.

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