Question

In: Economics

Question 1 outline and explain the behaviour of GBP and AUD and identify the economic factors...

Question 1

outline and explain the behaviour of GBP and AUD and identify the economic factors that influence the foreign exchange rates . Then you should collect and use financial news and news regarding national and international events which are likely to have an impact on the market. (400 words )

a) Do you think that exchange rates will go up or down in the next 3 to 6 months?

b) Explain why you believe the currencies are going to move in these directions?

Solutions

Expert Solution

And) The relationship between GBP and AUD can be considered the top foreign exchange trade in today's time, especially in the forex market. Due to the higher levels of correlation between the economies and trade taking place, a clear evidence of influence on the exchange rates of the pair is visible.

Taking into consideration, the type of AUD currency, it is mostly considered to be a commodity currency, since the prices of gas, gold, oil have a high impact on the AUD, because of which the risk of holding the currency or dealing in it, is always high. Thus along with this a global economic slowdown in the recent years and the decline of China's growth have had a negative effect on this currency .

On the other hand, as we discuss about the working of the pair and their currencies in the near future, it could become a little volatile according to the market movements characterized by the sleek and rapid price fluctuations and the ever existing unpredictable behaviour. Alongside this, several analysis have been carried out, and various difficulties have been faced in understanding and figuring out the traditional factors. This may have been happening due to the direct involvement of USD in the calculation of cross rates.

And on the other hand, Both the currencies react at speeds that are a little different in nature in relation the US economic indicators. Also, an aspects to consider to predict the rates is the correlation and this lead to the downfall but not in a long term scenario. Thus, these can be considered as a stable form of currency although slight fluctuations can be seen but mostly these have been highly intact in nature.


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