Windsor2

Hi All,

As promised he is an update of what's been happening throughout the Currency Markets over the last month.

GBP/AUD dipped to a fresh 12-year low at the start of May, with the Aussie encouraged by tentative signs the world economy may be on the road to recovery, outweighing some poor domestic economic data. Figures from the Reserve Bank of Australia also showed total credit rose a meagre 0.1% in March, well below forecast, pulled down mainly by sluggish business credit that declined by 0.6% from February. That mirrored a private sector survey which showed businesses were struggling with the worst conditions in almost 17 years last quarter. A collapse in forward orders and exports left them even more pessimistic about the outlook for the coming months. The survey of more than 900 firms from the National Australia Bank found business expectations for the next twelve months fell to their lowest level since the survey began in 1988.

The Aussie retreated from a seven-year high against Sterling mid month as mixed global economic data cast doubt on the strength of a recovery in the world economy, hurting demand for riskier currencies. The local Dollar remained under pressure after Australia’s government unveiled its largest deficit on record and forecast a decade of debt in its budget, designed to nurse the economy through recession and keep open the option of an early election. Treasurer Wayne Swan said the global downturn forced the government to write down revenues by AUD23 billion in the current year, its biggest hit to income since the Great Depression, and by AUD210 billion over four years. The budget forecast the economy to shrink 0.5% in 2009/10 before bouncing back to 2.25%growth in 2010/11, with unemployment to rise 8.25% by June 2010 from 5.4% now.

Consumer confidence fell this month, reversing some of April’s surge while consumers were also notably unhappy with the Central Bank’s decision to keep interest rates unchanged at 3.00% in May. The survey of 1,200 people by the Westpac-Melbourne Institute showed its index of consumer sentiment fell 4.3% to 88.8 between April and May, its second biggest fall following the release of a budget in the last ten years. Prospects of a weakening jobs market led to a rather moderate rise in wage costs for the first quarter. Government data on Wednesday showed first-quarter wage costs rose 0.8% in the first quarter, in line with expectations but slowing from a revised 1.3% rise in Q4.

GBP/AUD edged lower last week with the AUD boosted mostly by broadly higher commodity prices and growing investor risk appetite. Nevertheless, the Aussie came under fire mid-week after Australian business investment fell faster than expected last quarter, with companies slashing spending plans in the face of the economic crisis, adding to the view that the country is in its first recession since 1991. The slump in business expenditure was driven by the largest quarterly fall in plant and equipment spending since the survey began in 1987. This will feed into first quarter gross domestic product, which is likely to show a drop in the value of all goods and services produced. The government reported capital spending fell 8.9% in the first three months of 2009 to AUD22.96 billion and reversed the previous quarter’s surprise 7.3% rise.

Central bank rates

OZ: 3.00% (Next meeting 7th July)
US: 0.25% (Next meeting 24th June)
ECB: 1.00% (Next meeting 4th June)

High & Low of the month

High: 2.0599 (on the 27/05/09)
Low: 1.9687 (on the 08/05/09)

Difference in cost on £200k:

High: 411,980 AUD
Low: 393,740 AUD

A difference of 18,240 AUD

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.

Best Regards,




Mark Bodega
Director - HiFX

phat-dave

Hi Mark,

Is there any possibility of obtaining some market or forecast information for the AUD / CAD please?

Looking for strength or insight for Q3 '09 please.

Thanks
Dave

Saxa

Thanks for the report, interesting stuff.

I will be transferring 20K GBP to AUD within a month - is there any sign the AUD may weaken? Should I hold off?

Windsor2

Saxa

Over the past year, Sterling has been incredibly weak against all its major counterparts amid concerns about the state of the UK economy. Increasing levels of debt coupled with a high dependency on the fragile financial services sector has undermined confidence in the Pound. Whilst the Australian Dollar has also been very volatile, rising commodity prices coupled with the belief that the Australian economy is better placed to withstand the global turmoil has kept the currency relatively strong.

Going forward, we feel that Sterling is still undervalued despite recent signs of recovery. In contrast, the Australian Dollar is in overbought territory and looking vulnerable to a correction. However, we must also remain respectful of the long term downward trend in GBP/AUD that, at the time of writing, remains unbroken. With risk in both directions, coupled with the extreme volatility that is currently being witnessed in the currency markets, we would advise clients to fix their costs at the earliest possible stage if they are on a tight budget. This will give peace of mind and allow you to plan your future in Australia safe in the knowledge of your overall wealth.

I've just come across an article which appeared in yesterday's Australian newspaper. It explains what's been happening in the Aussie economy and the effects this is having on both the stockmarket and the exchange rate.

http://www.theaustralian.news.com.au...92-643,00.html

Hopefully it's some useful additional reading.

Have a good weekend.

Best Regards,

Mark Bodega
Director - HiFX

The details expressed in this transmission and accompanying documents are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. HIFX Plc accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information.

Windsor2

Phat Dave

Can't promise anything as very few of our clients (and I mean very few) people trade Aus / CAD but I'll see what I can for your you.

Best Regards

Mark