The pound to Australian dollar interbank exchange rate fell this week. This is due to the uncertainty surrounding future interest rate decisions from the Reserve Bank of Australia (RBA) and the Bank of England (BoE).
The financial markets remain uncertain if the RBA will reduce Australia’s interest rates, to support the economy during the ongoing bush fires. This is because, while the bush fires constitute a major natural disaster, Australia’s economic data recently has been surprisingly upbeat. This could convince RBA Governor Philip Lowe and his team to maintain borrowing costs at their current 0.75%, when they next convene on February 4th.
In recent weeks, the bush fires in Australia have wrecked millions of hectares of Australia’s territory, destroyed thousands of homes, and cost dozens of lives. As a result, it looks probable that Australia businesses and consumers could respond by spending less until the disaster is resolved.
The immediate focus will be on helping those affected, and rebuilding communities. However, if this slows Australia’s Gross Domestic Product growth in early 2020, this might affect the value of the Australian dollar.
Despite the natural disaster currently sweeping the country, it’s worth noting that Australia’s economy has performed well recently. For example, this week we learnt that home loans Down Under increased by 1.8% in November, far above forecasts for 0.4%, according to the Australian Bureau of Statistics.
Last week, we learnt that Australia’s retail sales jumped by 0.9% in November, easily above predictions for a 0.4% gain and October’s increase of 0.1%. These upbeat statistics may convince the RBA to keep interest rates steady, in spite of Australia’s ongoing natural disaster. In turn, this is supporting the value of the AUD.
Also next week, top-tier Australian economic data includes the unemployment rate for December, due on Thursday 23rd. These are forecast to show that Australia’s joblessness rose by 0.1% last month to 5.3%. A surprise above or below this figure could impact the Aussie dollar.
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