The Australian dollar fell sharply against its currency counterparts overnight after Westpac - one of Australia’s largest banks - cut forecasts for economic growth from 2.6% to 2.2% in 2019 and 2020, and also changed its interest rate predictions to show two rate cuts this year. Westpac’s expectation is that the RBA will cut rates in August and November by 0.25% each time, bringing the rate to 1% by the end of the year. This news allowed GBP/AUD to rise to a 3 and a half week high, and has provided a great opportunity for clients looking to buy Aussie Dollars this morning.
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So far this week the AUD has remained relatively subdued against the pound despite worse than expected wage Growth figures for the last quarter of 2018 released overnight on Tuesday, falling from 0.6% to 0.5%. Over a million Australian workers are struggling with the cost of living due to flat wage growth, which is putting pressure on not only household budgets, but also federal budgets with falling consumer spending and inflation.
However the Aussie dollar had been propped up by the prospect of a trade war truce between the US and China, following from comments yesterday from Donald Trump suggesting that he may not raise tariffs on 1st March on Chinese goods, as he had previously threatened. China and the US have been negotiating in Washington this week, and his latest comments have been taken positively by the markets, after Trump said “the date is not a magical number because a lot of things are happening”.
Although there is still the prospect of the US raising tariffs from 10% to 25% on $200 billion worth of Chinese goods, with the potential for further tariffs on $267 billion worth of imports, for now positive comments have been taken as positive signs that talks are going well. This is pivotal for the value of the Australian dollar which relies heavily on China as its largest trade partner.
Looking ahead, this evening the Reserve Bank of Australia (RBA) Governor Philip Lowe will give a speech which will be eagerly anticipated. It was reported earlier this month that the RBA may look to cut interest rates after the economy showed signs of being weaker than it had expected. After the recent bout of poor economic data, and this morning’s news of Westpac predicting 2 interest rate cuts this year, Lowe is likely to give further clarity on the Bank’s future interest rate path, and if any more hints towards cutting rates are alluded to we could see the Australian dollar weaken even further.
As this speech is outside of trading hours, if you have a particular rate you wish to trade at, get in touch with us today to make use of a Limit Order contract option, where we can automatically purchase your currency at your desired level, even if this is reached overnight.
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