Risk Aversion Keeps The AUD Down

24.05.2012

Are you looking to buy Australian dollars? Disappointing news from Europe and a slowdown in China means risk aversion keeps AUD down.

Peter Lavelle, our guest blogger, provides below an update of the British pound to Australian dollar foreign exchange rate, covering the 17th to 24th May 2012.

The Past Week:

The pound held at 1.61 against the AUD for the second week this week, as disappointing news from the UK and Eurozone was offset by a slowdown in China.

Looking ahead, there's no special reason this situation should change, meaning the pound and Australian dollar look set to remain in deadlock.

UK Recession Keeps Pound Under Pressure

In the UK, pound strength was limited by the fact that the UK contracted more than initially thought in Q1, as second GDP estimates showed a 0.3% decline.

This comes in addition to declining retail sales, as well as comments from the Bank of England that it might yet initiate more stimulus.

All this proved enough not to topple the pound (the UK remains a stable location to put funds after all, which is invaluable in this environment) but prevent it climbing against the AUD.

Chinese Slowdown Limits AUD Strength

In Australia meanwhile, the comparatively rosy outlook was offset by a slowdown in China, on which Australia is heavily dependent to fuel its mining sector, as well as the European debt crisis, which has tempered optimism around the globe.

In China, the Asian tiger's manufacturing base contracted for the 7th consecutive month this month, as demand for its products from Europe declined.

This could upset Australian prospects, given that China is Australia's biggest customer for raw materials. Without this demand, Australia has very few prospects for continued growth.

In addition, the Eurozone debt crisis limited AUD strength, as the global uncertainty led investors toward more stable currencies such as the USD.

What to Do if You're Considering Emigrating?

In many respects, this is an absolutely fantastic time to relocate to Australia.

The mining boom means Australia's demand for skilled workers (such as plumbers, carpenters, and quite obviously mining professionals) is through the roof.

If this is something you're adept in, you could easily increase your wage emigrating to Australia right now.

In addition, though the pound has not gained against the AUD in a fortnight, from a foreign exchange point of view it remains close to its highest rate since last November right now.

Yours kindly,

Peter

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