The Australian dollar has come under a lot of pressure in the last two weeks after the interbank rate almost broke through the 1.80 barrier against the pound. The expectation is for further interest rate cuts down under, which typically results in a weakening of the currency involved.
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Blackrock Inc has shorted the Australian dollar interbank rate and bets that the Reserve Bank of Australia (RBA) will look to cut interest rates to as low as 0.5% in attempt to revive the Australian economy which currently under pressure.
The Australian dollar is close to record lows vs the US dollar and is has started to weaken once again vs the pound. It is expected that the RBA will continue to cut interest rates as the economy struggles, tensions continue between the US and China which are affecting global growth.
As the Australian Dollar is seen as a riskier currency. As it is a commodity based currency any reduction in risk appetite as well as global tensions could result in the Australian dollar weakening. The current interest rate down under is 1.25% after the RBA cut rates on 4th June. RBA Governor Philip Lowe has said the recent cut was an attempt to reduce unemployment levels as well as increasing inflation levels.
Other banks including the Commonwealth Bank of Australia expects the RBA to cut rates at least twice during the course of 2019 which would take the interest rate to just 0.75%.
Following the recent federal election the Australian dollar was given a brief period of respite versus the pound but now that period is over and investors are looking at the overall health of the economy down under.
With growth being downgraded, house prices falling and the tensions in China there could be further problems coming the way of the Australian dollar during this year. However, whilst the UK political landscape remains in a period of limbo pressure also remains on the pound.
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