The sterling vs Australian dollar exchange rate weakened this week, partly because UK Prime Minister Boris Johnson looks set to “legally prohibit” the UK’s Brexit transition continuing beyond the end of 2020. This raises the risk of a new “No Deal” Brexit next year, if the UK and EU don’t agree a future trade deal in this tight schedule.

Australia’s unemployment falls to 5.2% in November

Australia’s jobless rate fell by -0.1% last month, as report by the Australia Bureau of Statistics (ABS) this week. This was above forecasts for unemployment to stay steady at 5.3%. In particular, this is because Australian companies surprisingly created 39,900 new jobs in November, far above forecasts for 14,000 new roles, as well as October’s 19,000 fall.

This has raised hopes that Australia’s job market might be gaining speed, following recent months in which the unemployment rate has risen, as companies have shed workers. To be specific, this week’s upbeat statistics takes Australia’s jobless rate closer to the Reserve Bank of Australia (RBA’s) target of 4.5%, which it considered desirable for sustainable inflation and rising wages.

BoC holds interest rates at 1.75% but signals future cut

RBA less likely to cut interest rates in 2020

With this in mind, it now looks somewhat less likely that the RBA will cut interest rates in 2020 below their current 0.75%, following the Central Bank’s three cuts this year. If the RBA were to hold Australia’s borrowing costs steady in 2020, this could be considered a vote of confidence in Australia’s economic outlook, and encourage both businesses and households.

After all, although the advantage of lower interest rates is that they reduce the cost of a loan, when interest rates fall very low, this tends to worry firms and consumers that the economy needs firm monetary support to grow. Already, the RBA has warned that it could cut interest rates as low as 0.25% next year, and initiate its own form of Quantitative Easing, an extraordinary stimulus. So we’ll see how Australia’s economy performs in coming months, and how the Reserve Bank responds.

Download our monthly currency forecast

Download here

News

Read more articles
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.