Debt Fears Trigger Improvement for GBP AUD Exchange Rate Forecast, RBA Decisions Questioned Recently

April 27, 2016 - Written by David Woodsmith

STORY LINK Debt Fears Trigger Improvement for GBP AUD Exchange Rate Forecast, RBA Decisions Questioned Recently

The Pound has reached rough parity with the AUD of late; this could be shifted tomorrow when RBA Assistant Governor Guy Debelle makes a scheduled speech.

Sterling has soared against the flagging 'Aussie' recently, thanks to the latter currency being heavily devalued by the falling inflation rate recently put across.

GBP Climbs vs CAD, NOK despite Rising Crude Oil Prices

Global oil prices spiked during yesterday’s afternoon session, with the price of a barrel of Brent Crude Oil jumping to almost $46 as investors continued to price-in evidence that the global economy is working its way through the oil glut which it faced at the turn of the year.

The news favoured the petro-currencies, with the Norwegian Krone (currency : NOK) and the Canadian Dollar (currency : CAD) outperforming most of the other sixteen most actively traded global currencies. However, the Pound Sterling (currency : GBP) still managed to record gains against the NOK and the CAD thanks to increased expectations that the UK will vote to remain part of the European Union on 23rd June.

Debt Issues in Malaysia Dampen Risk Appetite, AUD and NZD Exchange Rates Forecast to Struggle

Elsewhere, the world’s stock markets endured a decidedly wobbly day, with London’s benchmark FTSE 100 closing up by 0.38%, while the bourses of Frankfurt and Paris posted small losses.

Developments in Malaysia added to the flaky risk appetite on the day; the news that the 1Malaysia Development Bond (1MDB) had failed to pay its latest interest payment of $50.3m sent shock waves through the global markets. The state-backed bond missed the coupon payment thanks to a dispute between the Abu Dhabi government and Malaysia’s ministry of Finance over joint debt obligations to International Petroleum Investment Co (IPIC).

Investors are comfortable with the world’s governments owing trillions of Dollars via debt instruments, providing these governments are able to access new funding via the release of gilts on the global debt markets. Analysts forecast that if market participants begin losing faith in the ability of major administrations to revolve their sizeable debt, then the financial turmoil which follows will make the 2007–09 Credit Crisis seem like a minor event.

FX insiders forecast that the news from Malaysia may cause investors to shift out of risk-laden assets; if they are correct, then expect the Pound Sterling to record sizeable gains against the high-beta Australian Dollar (currency : AUD), New Zealand Dollar (currency : NZD) and South African Rand (currency : ZAR).

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TAGS: Australian Dollar Forecasts Canadian Dollar Forecasts New Zealand Do Forecasts