What The Relationship Between The AUD And The GBP Says About The Future Of Finance

What the relationship between the AUD and the GBP. It is said that the Dutch were the first to start a settlement on the shores of Australia. Since the continent was huge, a lot of Dutch traders saw the western and eastern coastlines easily, some of them decided to come ashore. The environment wasn’t inviting and had no commodities that had any worth back at their homes so they decided to leave. The first colony was started by the English after their landing in 1788, they sailed north to Port Jackson to find the best location to start the settlement, known today as Sydney Harbor. 

The Australian Dollar was linked to the English Pound and Australian banks had reserves in London Funds. In later decades, Australia shifted and strengthened its trade relations with Asia. The amount of foreign invested capital from the UK was extremely huge, it reached 500 billion pounds in 2015. 

We’ll be reviewing how the relation between AUD and GBP is going to affect the future of finance. 

The Impact of Brexit on Australia’s Trade 

Australia has free trade agreements with some of the biggest trading partners over the last few years. Australia’s free trade agreements ensure that the outcomes are mutually beneficial to all parties included. The implications and consequences aren’t really fully known in Australia until the situation with UK and Europe has reached an official agreement. If the UK exited EU its plan will include making a free-trade agreement with Australia as it will be part of a free-trade area. This will have an impact on the Australian dollar (AUD) vs Pound (GBP) relationship.  Australia has become a principal trading partner after Brexit, with high commission making it more attractive.

AUD/GBP Ratio Getting Lower

Australia’s chief central banker made some comments that negatively affected the viewpoint of Australia’s economy internationally. Markets leaned more toward believing that the Reserve Bank of Australia will lower the interest rates which will in turn weaken the AUD.

UK Investment in Australia

UK’s investment in Australia is immense, it is the second largest source of foreign investment. Australia’s largest exports are gold, wine, and lead.  Austrade, the Australian Trade and Investment Commission, help Australia’s economy by creating opportunities for businesses, educational institutions, and citizens by helping in the development of international markets and overseas education. Australia exports to UK alone almost a quarter of all total agricultural exports in Europe alone, in addition to almost half of Australian beef, and 65% percent of wine.

Correlations do change, and it’s not different for AUD and GBP. Tracking the changes and shifts in correlations is very important to understand the future of these two currencies. The global economic variables change constantly, almost every day, which makes it very hard to take a definite correlation without it changing daily. No matter how strong the daily correlations are, they may not be as accurate as a long-term correlation between the AUD and the GBP. A 6-month trailing correlation is very important to get a better understanding on the future of finance. What the relationship between the AUD and the GBP.