Currency Update - Ian Cragg from Send Payments

AUD - USD - 0.69

AUD - GBP - 0.56

AUD - HKD - 5.47

AUD - SPD - 0.97

AUD - CHY - 4.73

AUD - NZD - 1.10

AUD - USD - 0.69 AUD - GBP - 0.56 AUD - HKD - 5.47 AUD - SPD - 0.97 AUD - CHY - 4.73 AUD - NZD - 1.10

The global economy is in a state of flux at the moment. Political and economic uncertainty caused by the situation in Ukraine is leading to fluctuations in the value of different currencies. The Australian dollar is no exception.

Despite this instability, the Australian dollar is remaining relatively strong. This is due to a number of factors, including the country's stable economy and tight employment levels.

AUD - USD

The AUD-USD pairing is currently trading between the 0.6923 - 0.6932 range. Compared to the last week the AUD is down 2.18% and compared to the last month, the AUD is now down by 6.41%. This pairing is now trading at July 2020 levels, when the pandemic was at its peak. 

AUD is in a long-term bearish pattern that shows no sign of breaking anytime soon. This is due to a number of reasons. 5 year and 10-year analyses of forex seasonality shows us that the USD strengthens in May, this trend analysis can help investors and traders take positions for their trades in May. The USD is currently in its sixth consecutive week of gains which have taken the greenback to a 19-year high position.

This seasonality has coupled with the hawkish FED policy that is now being replicated by other Central banks around the world. FED is looking for another rate hike, whereas the RBA is set to hold its rates at least till June. RBA is also set to roll off the government bonds that it issued during the pandemic. If this position does not change, then the AUD may come under further stress in the coming weeks. 

Top this with the commodity supercycle that is heating up a lot of currencies across the spectrum. This supercycle is being aggravated by the Russia - Ukraine crisis that is driving the pricing of essential commodities up. China`s zero Covid policy is yet another factor that has created a potent set of factors that are driving inflation upwards, which is sending investors scurrying toward the strengthening USD.  

While forex seasonality puts USD in a bullish trend in May, the same analysis puts AUD in a bearish pattern. A 10-year seasonality analysis for the AUD shows that the AUD has lost approximately 2.15% in May. 

Fundamentally the Australian economy is stable, making AUD among the very few currencies that can lead the chargeback against the USD should the Chinese economy bounce back from Covid restrictions.  

However, for the time being, the markets are being driven by risk sentiment which in turn is being driven by political and economic uncertainty. The current investor sentiment is to sell the AUD-USD for the next week. 

AUD - GBP
The AUD-GBP is currently trading between the 0.5647 - 0.5665 range, it has gained almost 0.47% in value against the GBP in one week. This pairing is influenced mainly by the trade relationship and economic strength of both countries, Central bank decisions, and political climate. Looking at these three factors explains why the AUD is strengthening against the GBP. 

The UK is still struggling to bounce back from the pandemic, its economy grew by only 0.8% in the first quarter of this year, whereas the Australian economy gunned on the back of its stronger than expected Q4 recovery in 2021. The UK is also plagued by high levels of public debt and a weak GBP in the wake of Brexit and the current crisis in Europe. 

On the other hand, Australia has already bounced back from the pandemic and its economy is now growing. This difference in economic strength is one of the main reasons why the AUD is gaining against the GBP. 

Headline inflation levels in UK are at their highest in 30 years at 7% whereas Australia too is experiencing inflation around 5.5%, highest since the global financial crisis of 2008. 

In conclusion, the current trend is for the AUD to continue gaining against the GBP in the short to medium term.

The investor sentiment is to buy the AUD against the GBP for the next week.

AUD - NZD

The AUD-NZD is currently trading between the 1.1030 - 1.1054 range and has gained almost 0.59% in value against NZD in the past week. The AUD has had a good week against the NZD, with the NZD weakening against almost all major pairings. 

The central bank decision from the RBA is also contributing to this, with the RBA keeping rates on hold till at least June while the RBNZ is set for another rate hike in the last week of May. This aggressive behaviour of RBNZ is pushing the sentiment that inflation will rise in New Zealand, which is driving the NZD down. 

The economic outlook for both countries is similar, with both countries bouncing back from the pandemic. However, the Australian economy is growing at a faster rate than the NZ economy. This difference is also helping the AUD to outperform the NZD. 

The risk sentiment is pushing downward sentiment on the NZD, which is the same for AUD but the stronger economic fundamentals are keeping the AUD above the NZD. 

The investor sentiment is to buy the AUD against the NZD for the next week. 

If you’d like to connect with Ian Cragg from Send Payments and discuss your situation and your next fund’s transfer and when is the best time to make that transfer, you can email Ian directly from his International Currency Specialist Bio Page.

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