Australian Dollar Exchange Rate Today - GBP AUD Sees RED, Aussie Dollar Recovers vs Euro & US Dollar

September 28, 2014 - Written by David Woodsmith

STORY LINK Australian Dollar Exchange Rate Today - GBP AUD Sees RED, Aussie Dollar Recovers vs Euro & US Dollar

The Pound to Australian Dollar exchange rate (GBP/AUD) reversed Friday's positive direction today as the Aus Dollar recoups losses and Sterling’s conversion levels remain volatile in the face of the possibility of the UK entering into the conflict in the Middle East.

The Australian Dollar has fallen in recent weeks as investor risk sentiment wanes amid geopolitical tensions. The ‘Aussie’ has declined drastically against the US Dollar (USD) as the market factors in the prospect of a rate hikes in the US economy.

Pound to Australian Dollar under Pressure from Iraq Tensions

Both the Pound and Australian Dollar have felt downward pressure as global leaders decide to what extent to intervene in Iraq.

Friday will see members of the UK parliament meet to discuss and vote on the decision to send British forces into the fray. Australia is also awaiting the green light to proceed with action in Iraq, joining other influential nations.

Global leaders have met in recent weeks to discuss action against terrorist threat ISIL—Islamic State of Iraq and the Levant. Australian Prime Minister Tony Abbott commented: ‘Things are hastening to certain probable conclusions.’

The growing international effort to remove Islamic extremists in Iraq is involving more nations with the possibility of up to 26 countries uniting.

This week saw police officers in Melbourne take-down a suspected Islamic terrorist after he stabbed police officers, demonstrating that the threat extends to all corners of the globe.

King Abdullah of Jordan commented that the battle against terror extremists was ‘not an Arab or Muslim fight anymore. It affects every delegate here and beyond. It is the fight of our times.’ However, political leaders have hinted that the fight in Iraq could last some time. Foreign Minister Julie Bishop commented: ‘This is an ongoing battle that will take months and years.’

Pound and Australian Dollar both Pushed Lower by US Dollar

The Pound has been trading relatively statically versus other currency majors as parliament meets to vote.

The UK is expected to become involved in the Middle Eastern conflict and conduct airstrikes within several days.

However, whatever the outcome, both the Pound and the Australian Dollar have experienced lower exchange rates as the market adjusts to the prospect of US interest rates hikes taking place in the near future.

Trader Kazuo Shirai commented: ‘The strong Dollar trend across the board is continuing. The Fed is on track to end QE [quantitative easing] in October and is likely to raise rates by the middle of next year as planned, while we haven’t seen much improvement in other nations.’

The ‘Aussie’ has fallen almost 6.5% versus the US Dollar in the last three weeks as the US Federal Reserve has encouraged speculation that there may be more interest rate hikes than were previously forecast in 2015.

Some Fed Presidents have stated their impatience at waiting to increase borrowing costs, believing that the US should see interest rates heightened sooner rather than later.

However, dovish Fed members disagree. Fed President Charles Evans commented: ‘We should be exceptionally patient in adjusting the stance of US monetary policy.’

In the near future, escalations in geopolitical tensions will likely send ripples through the market and cause alterations to the GBP to AUD exchange rate.

Moreover, decisions to become involved in such unpredictable circumstances will encourage investors to seek safe-haven currencies.

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