The pound to Australian dollar exchange rate rose this week, following reports that the Reserve Bank of Australia (RBA) could cut interest rates in February to support the economy in light of the ongoing environmental crisis.

That said, in spite of this negative news, Australia’s economic data this week was largely upbeat, while next week’s releases include Australia’s home loans figures for November.

Bush fires continue to devastate Australia's landscape, RBA look set to respond

The Australian dollar has lost out this week, partly because bush fires continue to spread across large parts of the country, destroying thousands of homes and killing dozens of people so far. As a result, Australian households and businesses may well double down and spend less, thereby weakening Australia’s economic growth.

Given this, Australia’s Central Bank looks set to cut interest rates below their current 0.75%, to a new record low, perhaps at its next interest rate decision on February 4th. This would be to cut the cost of a loan, and alleviate the environmental disaster, by encouraging people to take out a mortgage, and for companies to hire and invest.  However, traditionally lower interest rates tend to weaken the Australian dollar, so the RBA’s decision could be worth watching for.

What else will drive GBP/AUD ahead?

Bush fires continue to devastate Australia's landscape, RBA look set to respond

The Australian dollar has lost out this week, partly because bush fires continue to spread across large parts of the country, destroying thousands of homes and killing dozens of people so far. As a result, Australian households and businesses may well double down and spend less, thereby weakening Australia’s economic growth.

Given this, Australia’s Central Bank looks set to cut interest rates below their current 0.75%, to a new record low, perhaps at its next interest rate decision on February 4th. 

This would be to cut the cost of a loan, and alleviate the environmental disaster, by encouraging people to take out a mortgage, and for companies to hire and invest.  However, traditionally lower interest rates tend to weaken the Australian dollar, so the RBA’s decision could be worth watching for.

Australia’s services PMI improves and building permits rise rapidly

However, in spite of Australia’s continuing bush fires, the country’s economic data this week has been largely upbeat. For example, the Purchasing Managers’ Index (PMI) for December rose to 49.8, above forecasts for 49.5, and November’s 49.5. In addition, Australia’s building permits increased swiftly by 11.8% in November, above predictions for 2%.

This signals some continuing momentum in Australia’s economy. That said, whether this trend continues in the wake of Australia’s natural disaster remains to be seen, and could affect the value of the AUD in the coming weeks.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.