In a concerning week for the AUD/USD exchange rate, it closed at 0.6644. This comes in a week where the US Federal Reserve did raise interest rates 25bps (basis points) however with the ongoing concern around the banking system in the US, the USD fell against most major currencies during the week, yet still strengthened against the Aussie.
After such an aggressive hike cycle, the overarching banking concern has seen the market price in potential rate cuts in the coming months, which was not even on the card 2 weeks ago.
The DXY (US Dollar Index) has fallen to a 4-week low, which caused the sell-off in the USD in the short term. Before this low the last time it reached this area was in June 2022, and even with this weakness in the USD, it's still gaining traction against the AUD, this is a concerning area for Australian Importers, as a few weeks ago we wrote about the potential to see the rates retest the lows of 0.62c, and if the AUD can't go up when the USD is going down, then this leaves a really worrying feeling for importers.
This week sees a lot of high-tier data from the US, Australia and Chain which will weigh heavily on the AUD/USD, so another week of hard knocks could be in store.
The AUD/USD will open the week below 0.67c for the 2nd time in 3-weeks.
The GBP to AUD exchange rates held above the last resistance area of 1.82 for 4 days last week, and touched a high of 1.8410 on Friday, a 12-month high with these rates not seen since March 2022.
The Bank of England on Thursday raised the official cash rate again by 25 bps, however, we did not see a large bounce as the rates were already hovering here before the announcement.
Again the overall weakness in the AUD seems to be playing it apart and a stronger GBP could be the new short-term normal with the next targets at 1.85 and then 1.90, a rate not seen since February 2022.
The last time the rates did reach 1.90 they sold off over 10% in just over a month, it s volatile currency pair and we always suggest taking advantage of rates at multi-month highs, and you just never know which way they will turn.
It's also a time to look to secure a rate for a certain time period, so for clients that are selling in the UK and moving GBP back to AUD, this could be the time to look at forward contracts and lock in some funds for a future date, and take advantage of a 12-month high.
Speak to us for more information and ideas.