AUD GBP Analysis - AUD GBP forecast PDF

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Summary

AUD GBP forecast...

Description

Date

Adj Close

1-Jan-15

0.51647

1-Apr-15

0.5182

1-Jul-15

0.4674

1-Oct-15

0.46235

1-Jan-16

0.496

1-Apr-16

0.52049

1-Jul-16

0.57406

1-Oct-16

0.621989

1-Jan-17

0.605235

1-Apr-17

0.579141

1-Jul-17

0.607531

1-Oct-17

0.582603

1-Jan-18

0.57223

1-Apr-18

0.54993

1-Jul-18

0.56386

1-Oct-18

0.544925

1-Jan-19

0.55301

1-Apr-19

0.54549

1-Jul-19

0.56526

1-Oct-19

0.53458

(a)(b)

AUD against GBP 0.65

0.6

0.55

0.5

0.45

0.4 Ja 1-

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(c) PEAKS

DROPS

1-Oct-2016

1-July-2015

1-July-2017

1-Oct-2019

1-July-2019

REASONS: 1-July-2015 (Drop) The global economic worries had pushed the Australian dollar (AUD) down. The main reason behind the decline of AUD was due to a decline in the commodities’ prices as China is the largest trading partner of Australia and China’s growth has constantly been changing at that time. So, China stopped trading with Australia during their GDP growth decline. This resulted in reduced growth of household income, government revenue, and businesses. Also, the rate of unemployment raised, with very slow growth in labor costs. So basically, slower growth rate in China, lower interest rate differentials, and all these related factors somewhat contributed to the currency fall of the Australian Dollar. 1-Oct-2016 (Peak)

The global economy of Australia was continuing to grow at a slower pace. Labor market conditions had upgraded in the advanced economies. The prices of commodities like iron ore, gas, and coal had risen. High commodity prices had maintained a rise in Australia's trade. Financial markets continued to work effectively. The decline in mining investment was being balanced by growth in other areas, i.e. residential construction, public demand, and exports. Household consumption had increased at a sensible pace. Part-time employment had been growing powerfully. The unemployment rate weakened. 1-July-2017 (Peak) At this point, Australia’s economy was growing at a moderate rate. The initial stage of the recovery phase was directly connected with the higher Commodity prices which led Australia’s export prices to lift and improved national incomes. United States economy was weak in terms of its inflation figures that helped the Australian Dollar to rise after the weakening of the US Dollar. The high exchange rate helped in contributing to subdued price pressures of the Australian economy. The employment growth rate moved toward up during good economic conditions. However, the wages of the laborers remained low. Lowinterest rates supported the Australian economy. Growing exchange rate resulted in a slower pick-up in economic activity and inflation 1-July-2019 (Peak) Australian Dollar was on the rise during this period due to the positive trading numbers from China. The increase took place due to the rapid rise in commodity which results in the benefit of the Australian Dollar. Australia is the trading partner of China also received a raise in the economy after the news surfaced. The positive numbers also showed the proof of a positive impact on the announcement of the initial stage of the trade deal agreed with the United States.

1-October-2019 (Drop) Falling of the Australian dollar showed global fear that not everything is going well in the Australian economy. The AUD can fluctuate freely according to movement in supply and demand forces for the currency in the foreign exchange market or also called the forex market. During this year the value of the Australian dollar increased and decreased. However, with time the Australian dollar has slipped low which leads to the global financial crisis. The local currency dropped to around 66.89 cents. The reduction in iron ore prices had contributed a lot to the value of the Australian dollar’s slide. 20% decline in iron ore price contributed to the Australian Dollar downfall. The decrease in AUD damaged the lifestyle of householders because they did not get enough income and wealth to survive. In addition to that, Australian business activity also weakened during this month as its GDP slowed down. Fall of the Australian Dollar led the unemployment rate to rise. (d) The Australian Dollar is being hit under these circumstances of growing pandemic. The value of AUD against GBP is estimated to be 0.539. The coronavirus remains a very major and highlighted public health issue, which is also having noteworthy and unprecedented effects on world economies and financial markets. Just like every country, Australian economy was already on a moderate level and after being hit by coronavirus the value of the currency is also going towards a decline. Countries knew that

experiencing huge economic losses as a result of the public health response would be inevitable. The unemployment rate has also increased due to this Covid-19 situation. There are some signs which suggest that perhaps the worst of the pandemic crisis is over for Australia and China has also come to Aussie’s rescue to help Australian dollar to rise against the pound. Nevertheless, there is a still a high potential for more shocks and surprises to come up in the near future. At the same time as the pound sterling has got weaker since the inception of the pandemic, just recently it too has been bolstered up by the increase in consumer confidence globally. Only time will reveal if this confidence is out-of-place, until then the foreign exchange markets will be having their full focus on the up-to-the-minute data and news to determine what is going to happen next. On this upcoming Friday, the Chinese gross domestic product is anticipated to have some huge declines for the quarter figures. Growth rate is projected to have been fallen to negative six percent for the year on year figure, with first quarter of 2020 estimated to witness a whopping ten percent drop. It might also be, however, contended that such critical news is already anticipated and thus ‘priced into’ the current exchange rates. But then again with the severity of such news, there is a huge potential for volatility to still exist and a situation where the currency market takes the news negatively can also be floated. With the Chinese economy having been undergoing such fast-paced growth for so many years now, it will be fascinating to witness market reaction on the news of this declined growth, and this piece of information should be taken into account by every investor who is currently tracking the AUD vs GBP levels.

References

Anon, 2016. Australian dollar could be poised for significant drop. ABC News. Available at: https://www.abc.net.au/news/2016-10-26/australian-dollar-could-be-poised-for-significantdrop/7967662 [Accessed April 29, 2020]. Anon, 2019. Australian dollar falls below US67c after retail sales disappoint. ABC News. Available at: https://www.abc.net.au/news/2019-09-03/asx-australian-dollar-aud-10-year-low-gfc-rbainterest-rate/11472970 [Accessed April 29, 2020]. Janda, M., 2017. How did the Aussie dollar get to 80 US cents - and can it stay there? ABC News. Available at: https://www.abc.net.au/news/2017-09-20/australian-dollar-pushed-higher-by-usdollar-weakness/8963216?nw=0 [Accessed April 29, 2020]. Monfort, J., Australian Dollar Could Shine in 2nd Half of 2019 as Economy Picks up Traction. The Pound Sterling Live - Today's Rolling Coverage of the British Pound Sterling. Available at: https://www.poundsterlinglive.com/aud/11891-australian-dollar-could-shine-in-2nd-half-of2019-as-economy-picks-up-traction [Accessed April 29, 2020]. Press, A.A., 2015. Australian dollar falls to new six-year low amid economic turbulence. The Guardian. Available at: https://www.theguardian.com/business/2015/sep/05/australian-dollar-falls-to-sixyear-low-amid-economic-turbulence [Accessed April 29, 2020]. Reserve Bank of Australia, 2017. Statement by Philip Lowe, Governor: Monetary Policy Decision: Media Releases. Reserve Bank of Australia. Available at: https://www.rba.gov.au/mediareleases/2017/mr-17-15.html [Accessed April 29, 2020]. Reserve Bank of Australia, 2019. 4 October 2016: Minutes of the Monetary Policy Meeting of the Board. Reserve Bank of Australia. Available at: https://www.rba.gov.au/monetary-policy/rba-boardminutes/2016/2016-10-04.html [Accessed April 29, 2020]....