Lucas_Dad

My pension pot is still back home, being invested and held in £. I always keep my eye on the £/$ rate, and it is trickling up again, so I am considering shifting it from £ to $ (though it has to remain there as transfer laws etc mean I can't shift it until I'm 55 at the soonest - another 7 years). My financial/pension advisor (bdh Sterling) is not a forex guy but has commented that if he we me, he'd be considering making the switch.

I've basic skills/knowledge in forex technical analysis and based on this alone I reckon we've a good chance of seeing £1 = $2.10, but along has come Covid-19, and my crystal ball broke years ago. As the mantra goes, markets can go down as well as up, as I well know.

Any thoughts/insights/etc ?

Cheers

Amazulu

With covid19 all bets are off and anything can happen. Personally, I'm putting all my financial decisions on hold until it gets sorted out

astera

Regardless of the pandemic I still feel the USD has been the safest bet in recent times. The Euro is up there too as solid. The Aussie Dollar has never been a good long-term strategy unless you get it really cheap and hold onto it for years until an overheated global market drives it up. On top of that you are looking at high interest rates during such times so you are earning on two fronts.

Basically the AUD (as well as CAD for instance) will thrive when the markets are doing well and the global economy is moving ahead strongly, but will suffer in the case of any slowdown or especially a crash in the financial markets.

abner

While the Australian economy is in many ways similar to that of Canada--both are highly-developed service-based economies domestically, coupled with a high reliance on commodity exports (energy, metals, food)--Australia is strongly tied to China, whereas Canada is strongly tied to the US.

carcajou

Not in Forex, which is what OP is asking about.

OP - I also have knowledge of futures markets. I would say your pension pot is not one to engage in currency speculation with, use other funds for that. So I think the answer to your question is either (1) which country are you actually going to retire in - keep or move your funds there; (2) which country will most of your expenses be in, keep your funds there/move them there so you are not exposed to a sudden rise in expense costs, at a time when your income is limited, due to currency fluctuations. If you are going to retire in one but have the bulk of your expenses in the other then I think you need to engage in substantial risk management preparation. The last thing you want to have happen is a GBP crash when you have that as income but primarily AUD expenses or vice versa when you are on fixed income.

abner

I've been tracking the CAD/AUD cross rate for 15 years, for family reasons, and the geoeconomic distinction I noted, between the two countries, has proven highly relevant to understanding developments in that cross rate over time.

Perhaps the observation wasn't entirely on-topic for the OP, but he cast a pretty broad net, and I was responding to part of astera's take on it.

carcajou

To each their own.

Pulaski

Large international banks employee teams of traders, analysts and economists to track currencies, and they have the capability of moving hundreds of millions of GBP, USD, AUD, CAD, EUR, etc. to take advantage of movements in currency and interest rates. If those banks could reliably predict what the exchange rates would be even 3-4 days from now they would be able to make a killing week after week, month after month, year in and year out. The fact that those banks don't make big bucks trading FX, and indeed many banks got out of the business of trying to run FX trading as a profit centre, should tell you something - specifically, that any guess of what exchange rates will be even a few months from now, is exactly that, a guess.

carcajou

Yep. The currency markets are no place for armchair speculators and the currency markets are not driven by TV news reports about China.

Are there really people out there who accept China's economic data at face value? Their economic reports are as reliable as their coronavirus reports.

astera

I think the only way to seriously invest in currencies is to do it in the long-term. Day-trading or "get rich quick' forex schemes are the worst. Short-term volatility and/or unpredictability make it a bit of a lottery, but in the long run you can invest wisely and follow the global economic output which will have a greater impact on currency movements that even local economic data.

abner

Oh, please...
Does any serious person actually doubt the macro-level growth of the Chinese economy over the past 30 years? Or at the very least, their very concrete and externally-verifiable escalation of commodity imports--including those from Australia--and consumer-good exports over that period...? One can quibble with Chinese-sourced economic data on a detail-level, from time to time, but it has actually proven increasingly reliable over the long haul..

astera

Some things are quantifiable, especially imports, probably the vast majority of exports, but overall China remains a black hole when it comes to reliable economic data. Or as the current pandemic has shown, even medical data.

But global markets will always continue to trade regardless of Chinese data, the world will keep on spinning and people will keep on trading. You simply have to factor in a lack of credibility of some data and move on.

There really is no other choice anyway. Plus when it comes to the issue at hand - currency trading - I wouldn't be too worried as I never check Chinese data anyway (I only look at the general picture, not the details). Regardless of how well they portray their economy to be doing and how great Australia's exports to China might be, the AUD will still go into freefall if the US stock market suffers a crash. Even if the Australian economy has never been better, exports are the largest in history, etc. Same with Japan. The country could be in a massive recession but their currency will swing upwards in such a scenario as well.

abner

Yada yada yada...

I don't need any lessons about making decisions on imperfect and/or incomplete information, regarding Chinese economic data or anything else.

While we're unfortunately getting very far from the OP's OP here, my point was that recent movements in the CAD / AUD cross have indeed been influenced by differing levels of reliance on the Chinese market for Australia vs Canada, an effect partially amplified by political noise from the Trump administration about tariffs, whether threatened or actual.

5 years ago, the CAD and AUD were "risk on / risk off" currencies that moved practically in lock step, at close to parity in value. No longer the case.

Don63

I was in the same situation back in 2005 when i did the transfer, although times were not as turbulent as they currently are. In your timely decision to transfer, you might want to consider more things than +/- FOREX swings. Unless ATO rules have changed since 2005, if you have PR in Australia, the growth in your overseas pension is taxable from the date of your arrival in Australia through to the time of transfer. In my case back then, it meant 2 years growth was included in the transfer. So, xxx GBP @ FOREX gave yyy AUD in a new Super account with ATO taking a % on the remit before it hit the Super (ATO taking the estimated growth, not actual - ATO Rules). An advantage you currently have is that your nett yyy AUD will buy more dividends than it would have done say 3 months ago because the markets have tumbled. Moreover, you may be transferring less GBP and growth because that too may have tumbled meaning ATO's cut is less (this will depend on what ATO say and the timing). So, (and again, unless ATO rules have changed) if you wait for better FOREX you could miss out on current low dividends that could recover in 3-12 months and give your Super a boost that may beat off any (possible) FOREX swing in your favour. That said, between Feb and Apr 2020, FOREX favours more AUD from GBP transfers than it has since 2016 (minor short term spikes ignored).

carcajou

Which is exactly the point. Far more things move markets than what you are talking about and I am not sure you appreciate that. Your fundamental analysis of this market lacks complexity and is spotty at best, and ignores the massive and outsized role speculators (who make up the vast majority of the market, not hedgers) play in the currency markets. In the past 17 years the Australian Dollar has fluctuated in value wildly, from 2:1 against the US Dollar to being worth 7% more than the USD to all the way back down to almost 2:1 again. "Links to China" and "Trump" don't explain that. Professional speculators view these things a lot differently than a tiny armchair trader sitting on the couch watching the 2 minute business report on the ABC.

You don't play the currency markets with the rent money or the retirement money.

While it is unclear if the OP is talking about a futures market or a forward market, I maintain he needs to reduce his exposure before doing any speculating. That would mean aligning his income and expenses in the same currency.

Don63 also makes an outstanding point about the regulatory and taxation climate. OP could easily find himself in a complicated tax regimen with unforeseen consequences.

I don't give financial advice. Your money is your responsibility and OPs is OPs responsibility.