In this post I want to answer the question: is the Australian dollar to UK pound exchange rate going up or down? This might be of interest if you’re thinking about emigrating to Australia, or are importing and exporting goods to Australia, and want to know what’s in store for the exchange rate.
This is a question that needs to be answered in two parts:
1. Is the AUDGBP exchange rate going up or down today, as in the very recent past?
2. Is the rate going up or down over the longer term, compared to the last year or five years?
Let’s address these points one at a time then.
Is the rate going up or down right now?
Right now, as in this week, the Australian dollar to UK pound exchange rate is going up. This past week for instance, the pound has fallen from 1.56 against the emu dollar, to just 1.54 or so.
This is because of the Eurozone debt crisis in large part. The UK is economically tied to Europe, meaning that if the common currency falls apart it could have dire consequences in Britain. For that reason, investing in the UK is less attractive, which hence reduces the demand for UK pounds and reduces their value.
By comparison, Australia is benefiting from strong demand for its natural resources from China. This has protected Australia from the global downturn in large part, to the extent that it’s performing better than perhaps any developed country in the world right now. That’s given the AUD a boost.
Is the rate going up or down compared to the longer term?
In January 2012, the Australian dollar hit its highest point against the pound in at least a decade, at 0.68. That’s in large part because of the long-term trends I detailed above: Australia is benefiting from permanent interest in its resources from China, while Europe has been in trouble ever since the financial crash.
Yet at present the AUD to GBP foreign exchange rate is just 0.64, indicating the Australian dollar did not continue to climb. Why is this the case? Because January saw a relative calming down of the situation in Europe, when the European Central Bank handed out some €1 trillion in loans to European banks. That brought some relief to the markets, including in the UK.
Furthermore, although the Australian dollar has enjoyed a stellar climb since 2008, it’s possible it’s run out of road. This is because, though Australia is performing superbly right now, it remains a small economy of just 10 million people or so, and highly dependent on Chinese fortunes. That could be limiting Australian dollar strength, even as the European debt crisis re-ignites.
Hence, it mightn’t be long before the Australian dollar to pound exchange rate reaches a new equilibrium.
I do hope this post has been useful.
If you have any questions not answered here, or would like to find out more, don’t hesitate to contact foreign currency exchange specialist Pure FX.