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Hi, could you please give me an indication of how you think the AUD will perform against the Pound Sterling and the USD over the next 12 months? Do you think our Aussie dollar is going to rise or fall against these currencies?
A: I expect the Australian dollar to rise, buoyed by stronger world growth, rising commodity prices and ongoing weakness in the US dollar. The latter is a function of ballooning US budget deficits, rampant money supply growth and a lessening of the US dollar’s status as the “world’s reserve currency”.
The AUD has been on a strong upward trend until the last few months or so, but has taken a bit of a breather as the spectre of rising inflation and higher US interest rates has supported the US dollar.
With the pound, it is not quite as clear because since Brexit, the pound has been under pressure (and the AUD has risen against the pound). If the British Prime Minister can negotiate some material trade deals, a sharp rally in the pound couldn’t be ruled out.
On balance, I favour a higher AUD against both currencies over the next 12 months.
