Australian Dollar and Sterling Pound
While Australia is a commonwealth country, it does not share the same currency as United Kingdom. Currently, 1 British Pound/ Sterling Pound (GBP) trades at 2.065 Australian Dollar.
Note: Until 1967, the Australian dollar was pegged to the Sterling Pound. This peg was removed in 1967 when the Sterling Pound greatly depreciated against the US Dollar.
One of the low points of the British Pound came in May 2009, when it was trading at less than 2 Australian dollar. In part, this is caused by the ripple effect of global financial/ economic crisis in the last quarter of 2008. Banks in UK face collapse, which raise the doubt if the Bank of England has the ability to bailout these banks and at the same time flex the muscle to stable the Sterling Pound.
The British Pound has recovered slightly since, although it is now nowhere near the high of 1 Sterling Pound = 2.45 Australian dollar in Oct 2008. This means tourist from Australia can be smiling all the way to UK. Flights from Australia to United Kingdom is now about 30% cheaper due to favourable currency exchange rate as well as lower fuel tax on passengers.
Outside of these 2 countries however, both the Australian Dollar and the Sterling Pound face downward pressure, with investors in forex currently prefering safe-havens which includes the US Dollar and the Japanese Yen. This trend is likely to continue. In addition, Australia’s government is set to sell about $60 billion worth of debt this year to raise funds for its stimulus plan. WIth a corresponding spike in local yields, speculation is fueling that interest rates could rise by year-end. UK Pounds will be further weighed down globally if there are further releases of weak UK retail sales data and poor economic data.
Another factor that can weigh both currency down is the decision if Australians should remove themselves from the list of commonwealth states. This decision will lead to an initial uncertainity – and will also make a difference on how these 2 currencies (Australian dollars and the Sterling Pounds) trade against each other.
