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Discussion Starter · #1 ·
Hi All,

Here is an update of what’s been happening in the Currency Markets throughout September with the Aussie Dollar.

The month started as GBP/AUD crashed to a fresh 13-year low with the Aussie buoyed by a surprising jump in business investment last quarter, suggesting the Australian economy is growing faster than expected and underpinning bets for local rate hikes later this year. Data from the government also showed firms expected to spend heavily in 2009/10 as well, transforming the outlook for one of the hardest hit parts of the economy. Business investment had been expected to drag on growth with analysts forecasting a 5.0% fall in capital spending. Yet the numbers showed a 3.3% rise in the second quarter, and the AUD24.07 billion spent was the second highest reading on record. Crucially firms were also upbeat about their spending plans for the year the end of June 2010. The latest estimate was for spending of AUD90.6 billion in 2009/10, a major upgrade from the previous estimate of AUD78.5 billion.

Mid month the Aussie rallied to a 24-year high against a broadly weaker Sterling last as investors continued to go long on the back of rising confidence in riskier assets such as stocks and commodities. Reaction was relatively muted after Australia’s Central Bank voiced that it felt the economy was substantially stronger than expected at its policy meeting earlier this month, but decided there was enough uncertainty at home and abroad to argue against a hike for the time being. Minutes from the RBA’s (Reserve Bank of Australia) policy meeting on Tuesday showed its board had balanced the risk of fuelling inflation against prematurely choking off recovery when it decided to leave cash rates at a record low of 3.00%.

Last week the Australian Dollar remained the dominant force over Sterling as buoyed by further signs of economic recovery. New home sales surged by 11.4%m/m as first time buyers rushed to take advantage of First Home Owner Grants although it remains to be seen how the market holds up when the initiative is removed at the end of this month.

There was also encouraging signs from the labour market as the Skilled Vacancies Index rose 4.7% although the index is still running 49.3% lower than this time last year. Most importantly however, was a generally positive review of the Australian Banks in the semi-annual Financial Stability Review. Although bad loan provisions are expected to increase in the coming months, the banks are considered to be well capitalised and profitable, especially when compared to many similar institutions abroad.

Current Central Bank Rates:

Australia (Reserve Bank): 3.00% (Next meeting 6th October)
UK (Bank of England): 0.50% (Next meeting 8th October)

GBP/AUD Highs & Lows of September:

High: 1.9585
Low: 1.8070

A movement of: 8.38%

Difference this would make on £200k

High: 391,700 AUD
Low: 361,400 AUD

A difference of 30,300 AUD.

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.

Regards




Jon Sermon
HiFX
 

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Thanks for providing such an easy to read yet informative update - really helpful :)

What would be your predicitons for the GBP/AUD exchange rate over the next 3 months? I have moved to oz with my girlfriend and am studying to be a pilot. I really regret not transfering money to Oz back in June when the rates where around 2-2.1 !! Now they're down to low 1.7 and I really can't face the idea of transferring money at that rate.......although I will have to in the next 3 months in order to continue flight training...........with no prior knowledge of the Forex market, I am confused as what to do - transfer now or wait.......I get the general impression that the rates are likely to bounce back but how long will this take, if at all?!!

I realise that any questions on this subject are 'How long is a piece of string' quesitons but any help or insight anyone could offer would be really helpful :)

Biggles
:plane:
 

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Discussion Starter · #3 ·
Hi Biggles,

Firstly thanks for the feedback, I ‘m pleased you find the posts an informative read.

Throughout 2009, as you have already touched upon we have seen huge movements of the GBP/AUD exchange rate. From a rate of 2.28 (GBP/AUD) at the end of January 09, to the rate as it is today, which is sitting at around 1.758! This means that so far this year we have seen movement of nearly 23% in respect of GBP/AUD. In January based on the above figures £100,000 GBP would have bought you 228,000 AUD and today at the current rate the same amount of sterling would buy you 175,800 AUD. That is a difference of 52,200 AUD (certainly a huge amount).

The GBP/AUD rate has been affected by many reasons. The first being the fact that the economy in Australia has not been hit quite as hard as in the UK. Recently the governor of the RBA (Reserve Bank of Australia) was quoted saying ‘Australia only suffered a mild downturn’. Comments like this can only help strengthen the Aussie Dollar. Recently Interest rates in OZ rose from 3.00% to 3.25%. This again can only be seen as a positive move as the Aussie Dollar becomes a more ‘attractive investment’ and shows that confidence is growing in the Australian Economy.

Australia has enjoyed a stream of positive data recently, with full time employment growing and the unemployment rate dropping slightly. This positive data has helped to strengthen the Aussie Dollar against a basket of currencies and with Sterling being weak anyway; this has really had a negative affect on the GBP/AUD rate.

Sadly however no one has that magical ‘crystal ball’ and with the Currency markets being as volatile as they are it’s very difficult to say which way things will go especially as this ‘volatility’ looks set to continue. If more positive data starts to come out of the UK then we may very well see a pick up in GBP/AUD rate. But again it’s difficult to say when or if this may start to happen.

You really have to ask yourself if you can afford for the rate to go any lower. Not everyone has time to ‘sit it out’ and will need to do a transfer of funds regardless, which by what you have stated your timescale is within 3 months. One option would be risk….you wait it out but if that rate were to worsen further, then obviously your flight training will cost you more sterling (obviously it could also go in your favour and cost you less sterling but it's a gamble). Or you transfer the funds soon…this way at least you have safeguarded yourself against any further movements and removed the ‘risk’ factor. You could also look at sending over some funds now and then some funds in 3 months. This way a certain percentage of your funds have been safeguarded.

As I've said before and no doubt I will say again.....what you do is completely up to you - it all depends on what you're looking to achieve and your appetite for risk.

I hope this helps and all the best with the flight training!

If you have any further questions please don’t hesitate to drop me a message.










Hi All,

Here is an update of what’s been happening in the Currency Markets throughout September with the Aussie Dollar.

The month started as GBP/AUD crashed to a fresh 13-year low with the Aussie buoyed by a surprising jump in business investment last quarter, suggesting the Australian economy is growing faster than expected and underpinning bets for local rate hikes later this year. Data from the government also showed firms expected to spend heavily in 2009/10 as well, transforming the outlook for one of the hardest hit parts of the economy. Business investment had been expected to drag on growth with analysts forecasting a 5.0% fall in capital spending. Yet the numbers showed a 3.3% rise in the second quarter, and the AUD24.07 billion spent was the second highest reading on record. Crucially firms were also upbeat about their spending plans for the year the end of June 2010. The latest estimate was for spending of AUD90.6 billion in 2009/10, a major upgrade from the previous estimate of AUD78.5 billion.

Mid month the Aussie rallied to a 24-year high against a broadly weaker Sterling last as investors continued to go long on the back of rising confidence in riskier assets such as stocks and commodities. Reaction was relatively muted after Australia’s Central Bank voiced that it felt the economy was substantially stronger than expected at its policy meeting earlier this month, but decided there was enough uncertainty at home and abroad to argue against a hike for the time being. Minutes from the RBA’s (Reserve Bank of Australia) policy meeting on Tuesday showed its board had balanced the risk of fuelling inflation against prematurely choking off recovery when it decided to leave cash rates at a record low of 3.00%.

Last week the Australian Dollar remained the dominant force over Sterling as buoyed by further signs of economic recovery. New home sales surged by 11.4%m/m as first time buyers rushed to take advantage of First Home Owner Grants although it remains to be seen how the market holds up when the initiative is removed at the end of this month.

There was also encouraging signs from the labour market as the Skilled Vacancies Index rose 4.7% although the index is still running 49.3% lower than this time last year. Most importantly however, was a generally positive review of the Australian Banks in the semi-annual Financial Stability Review. Although bad loan provisions are expected to increase in the coming months, the banks are considered to be well capitalised and profitable, especially when compared to many similar institutions abroad.

Current Central Bank Rates:

Australia (Reserve Bank): 3.00% (Next meeting 6th October)
UK (Bank of England): 0.50% (Next meeting 8th October)

GBP/AUD Highs & Lows of September:

High: 1.9585
Low: 1.8070

A movement of: 8.38%

Difference this would make on £200k

High: 391,700 AUD
Low: 361,400 AUD

A difference of 30,300 AUD.

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.

Regards




Jon Sermon
HiFX
 
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