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GBP/AUD Forecast: Pound To Australian Dollar Exchange Rate To Break Two To One

November 27, 2013 - Written by Toni Johnson

The Australian Dollar was dealt a body blow yesterday afternoon when leading investment bank Goldman Sachs announced that it is forecasting that the Australian Dollar US Dollar exchange rate (AUD/USD) will tumble to 0.80 next year. The pair is currently residing in the low 0.90s, but the highly respected financial institution predicts that economic fundamentals will bring the Australian unit to its knees over the next twelve months. Analysts at Goldman Sachs went on to state that they anticipated that the AUD USD exchange rate to fall further in 2016, with the pair expected to reach as low as 0.74.

AUD/USD Weakening Will Send the Pound Australian Dollar Exchange Rate (GBP/AUD) Above the 2:1 threshold

Ceteris paribus, (which they won’t be), such a weakening of the AUD/USD exchange rate will send the Pound Australian Dollar exchange rate (GBP/AUD) back above the two to one threshold. The seeds of the current move against the Aussie originated some two years ago when global commodities prices reached an all-time peak. The downward drift in the price of raw materials which has followed has hit the export-dependent Australian economy harder than most and the expected continuation of this shift southwards will be at the heart of the Aussie’s problems.

There are additional technical factors behind the projected downward move in the value of the Australian Dollar; the Aussie suffered a sharp sell-off in the days following the demise of Lehman Brothers in October 2008. This sent the Pound Australian Dollar exchange rate (GBP/AUD) up into the 2.6000s following a bout of irrational exuberance amongst currency market participants. In truth, the pair was grossly overbought at this time and a technical correction was due. During the 4 ½ years which followed support welled up for the Australian unit and by April 2013 GBP AUD had slumped to a fresh 28-year low in the middle 1.4000s.

Goldman sees this as a central problem for the Aussie moving forward. The overvaluation of the AUD has generated a deep-set imbalance in the Australian economy which caused the antipodean nation’s exports to be priced out of foreign markets while shipments into Australia became punishingly expensive. Sometimes a free-floating currency is not the best way forward for a nation and this would appear to be one of those occasions.

Key Australian Dollar Exchange Rates (27/11/2013 11:15 GMT)

The British Pound to Australian Dollar exchange rate is trading up +0.41% at 1.78463 GBP/AUD.
The Euro to Australian Dollar exchange rate is trading up +0.11% at 1.48928 EUR/AUD.
The US Dollar to Australian Dollar exchange rate is trading down -0.1% at 1.09537 USD/AUD.
The Swiss Franc to Australian Dollar exchange rate is trading up +0.13% at 1.21055 CHF/AUD.
The Canadian Dollar to Australian Dollar exchange rate is trading down -0.04% at 1.03960 CAD/AUD.
The New Zealand Dollar to Australian Dollar exchange rate is trading down -0.01% at 0.89813 NZD/AUD.

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