The Australian dollar fell against the majority of its currency pairings yesterday, after a speech from Reserve Bank of Australia Governor Philip Lowe provided a gloomy outlook on the Australian economy in the early hours of yesterday morning.

Currency Pair% Change (Month)Difference on £200,000
GBPAUD3.0%AUD $10,730

The Reserve Bank of Australia (RBA) cut interest rates for the second month in a row this month, bringing the rate to a record low of 1%, due to concerns over a slowdown in China which has been heavily impacted by the ongoing trade war with the US, which has knock on implications to Australia as it is its largest trade partner, combined with a slump in housing. During the minutes released after the interest rate cut was announced, suggestions had been made of tightening monetary policy if needed, however Lowe’s comments yesterday bolstered fears that the economy was heading for its first recession in nearly 28 years.

Lowe warned that ‘it would be some time before inflation is comfortably back within the target range’ and that ‘it is reasonable to expect an extended period of low interest rates’. According to reports on Bloomberg, there is now an 81% chance of a further cut to rates by the end of the year, potentially bringing this down to 0.75%. Chief Economist at Westpac, Bill Evans, has also forecast two cuts by February 2020 which could bring the rate down as far as 0.5%.

Aussie trade surplus shrinks, on fewer exports

Australian Inflation and Housing data next week could provide further signals to monetary policy

Inflation data in the form of Consumer Price Index for the second quarter of 2019 will be released in the early hours of Wednesday morning, which could provide further suggestions to how soon an interest cut could be. The expectation is for a rise from 0% to 0.2% so if this is the case we could see the Australian dollar strengthen, however anything less than expectation and it could weaken the AUD further.

New Home Sales figures will be released on Thursday, which will likely be in focus by the RBA due to the current slump in the housing market, and Friday will bring Retail Sales data which is expected to show a slight improvement in June.

If you would like us to alert you if the rate you are hoping to achieve becomes available, you may wish to get in touch with us so that we can help you to plan for an upcoming currency transfer involving the Australian dollar.

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