Since the beginning of the year the Australian dollar has generally experienced weakness as a consequence of the ongoing trade battle between the United States and China, its largest trade partner.

Currency Pair		% Change (Month)	Difference on £200,000
GBP	AUD	3.95%	AUD$14,360

Despite this, the Australian dollar has benefitted from the political frictions in the UK over the last 2 weeks, which has seen the Aussie gain around 4 cents against the pound, with mid-market levels opening trading this week below 1.84.

As many reports suggest the Reserve Bank of Australia is edging closer to their first interest rate change since 2016, there’s arguments to suggest these gains could be short lived, however over the weekend a surprise result in the Australian general election saw Scott Morrison’s centre-right government cling to victory, despite trailing in most opinion polls. Following the result, sterling failed to hold its ground and lost around 1 cent against the Aussie, which pushed the pairing below 1.84.

It will be interesting to see how sterling will respond over the coming weeks, with the fourth meaningful vote of Theresa May’s proposed exit deal from the EU on the 3^rd of June set to cause sparks and following steep losses against the Aussie this year, sterling has typically bounced back relatively quickly.

Reserve Bank of Australia Outlook Confidence

RBA Governor speech to provide interest rate insight?

There are no major Australian economic data releases this week, so investor attention will be primarily focused on the response to the Australian election over the weekend and the speech from the Reserve Bank’s Governor Philip Lowe on Tuesday, which could provide an insight into the next interest rate decision on June 4^th.

Reports have suggested the bank are leaning towards a cut, which could see the rate drop below 1.5% for the first time in over 2 years, any indication of a change could see the Aussie weaken as a result. For more information, please get in touch with your account manager, or contact our trading floor directly on 01494 725 353.

News

The key reason for Sterling’s current vulnerability however is Brexit. If there is one thing investors do not react well to it is uncertainty and at present it is extremely difficult to call whether or not a deal is going to come to fruition.

22nd December 2020

Sterling Remains Fragile With a Brexit Deal Hanging in the Balance

Sterling is in an extremely fragile position following Boris Johnson’s announcement on Saturday that many areas of the UK would be placed into Tier 4 lock down.

By Daniel Johnson