Currencies experience many upturns and downturns over time. Looking at one month or even one year is not always enough to see the relevant trends. It can be useful to look back and see what caused volatility at different times, how recent trends compare to other significant past trends, and to observe significant benchmarks in the currency exchange rate.
While the Pound Sterling has been a stronger world currency over the last 10 years, rates for exchanging 1 GBP to AUD have experienced dramatic changes. Looking back at some of the trends that affected the exchange rates over the past 10 years can give some idea about the volatility of the market and what we can expect in the future.
GBP to AUD Trends Over 10 Years
Here are the 8 more notable trends in the AUD to GBP exchange rate from 2008 to September 2018.
2008 Market Crash
What began as a subprime lending crisis in the US quickly spread to markets around the world. The Pound Sterling took a harder hit than the Australian dollar in the long run, but both experienced severe setbacks from the crisis. AUD took an earlier hit, causing exchange rates from GBP to AUD to skyrocket to 10-year highs of 2.649 in October of 2008.
After the initial high point, the rate took a strong downturn that would last until mid-2013.
Progressively Stronger AUD
In the last 5 years, the AUD has begun to look stronger. Compared to the lows experienced around 2013-2014, the AUD has been steadily and consistently increasing in value, especially when compared against the USD. The Pound also gained some momentum during the same time period, though the AUD continued increasing in value against the GBP more consistently from 2015.
The most recent and impactful change to the GBP-AUD exchange rate has been the uncertainty and market instability following the Brexit vote in 2016. After the UK voted to leave the EU, the GBP’s value immediately plunged. Within two weeks, it reached its lowest point against the AUD in three years, but it continued to trend downwards for months. The Brexit vote itself resulted in a low point of 1.59092 AUD per 1 GBP by October 20th, 2016.
Since the 2016 vote, new Brexit updates tend to have a negative effect on the GBP. Theresa May upholding the “leave” decision temporarily reduced the value of the Pound. In September of 2018, the UK market and GBP investors are facing further uncertainty over the ongoing negotiations. By March 29th, 2019, the UK will leave the EU and must have a deal in place, or there will be a so-called “hard exit”. The deal that’s agreed on, or the failure to secure a deal, will have an enormous impact on the GBP.
2013 Recession Fear
In the UK, 2013 was a turbulent year for currency exchange. The market looked to be taking another downturn and investors feared it would be a recession as catastrophic as in 2008. The GBP lost a lot a value during this uncertainty. The AUD also lost value, though it wasn’t hit quite as hard as the GBP. Exchange rates from British pounds to Aussie dollars saw an immediate dip because of these fears, although they didn’t materialize and rates did steadily return to normal.
Declining Commodity Prices
The Australian economy is largely dependent on commodity exports. Around 2013, many world commodities began to see falling prices. As the prices continued falling, the AUD lost value with as well. While commodities reduced in price, the GBP did not experience much of the turmoil that Australia’s economy did.
While Australia’s dollar became more volatile, the GBP remained fairly strong, causing exchange rates to swing strongly in favor of the GBP.
Asian Exchange Rate Fluctuations
The Australian dollar is frequently exchanged for Asian currencies to combat some of the effects of high interest rates on import-export deals. As Chinese and Japanese currencies experience fluctuations in value or changes to their interest rates, the AUD also feels the effects. Over the last 10 years, changes to Chinese currency have had a negative impact on the AUD on and off. It has not happened all at once, but it has caused a mostly negative result.
Greece Debt Crisis
The Euro went into crisis as Greece’s debt got out of control around 2010. This had an impact on the strength of the GBP as European markets faced uncertainty about the future of the Euro and the EU in general. Australia was not as heavily involved in the Greek debt crisis as the UK, though the AUD did also experience some volatility. However, the Pound Sterling weakened at an even faster pace than the AUD.
Greece’s debt crisis came as a result of the 2008 market crash and it added momentum to the currency crash. The GBP ended up weakening considerably compared to the AUD.
China Iron Ore Demand
Australia is heavily dependent on China to buy large supplies of iron ore mined in the country. Whenever commodities experience a decline in price, iron ore is a particularly noteworthy commodity because of the huge impact it has on the Australian economy. In this case, many Australian mining companies over-produced to compensate for lowering prices. This led to even lower prices and a heavily weakened Australian dollar.
As each country’s economy and the world economy experience changes, the GBP to AUD exchange rate will continue to flow with the market. Looking back at the biggest factors for change in the last 10 years gives some indication of what to expect as we move forward.