The pound to Australian dollar interbank exchange rate rose this week, to over a four-month high. Sterling has benefited from the reports of progress in the Brexit negotiations, although these have yet to be fully substantiated.

In addition, the Australian dollar weakened, because the Reserve Bank of Australia (RBA) painted a pessimistic picture of Australia’s economic outlook, and because a drone strike attack on a Saudi Arabian oil field reduced demand for so-called “commodity currencies” like the AUD.

Coronavirus continues to threaten the Australian economy

Reserve Bank opens door to further rate cuts

This week, the minutes of the RBA’s latest interest rate decision were released, in which Australia’s central bank presented a pessimistic outlook for the economy Down Under. For instance, the RBA noted that, even though Scott Morrison’s government has cut taxes for low-to-middle income earners, “the [RBA’s] liaison with retailers suggested that these [tax cuts] had yet to lift spending noticeably.”

In addition, the Reserve Bank said that: "wages growth had remained low and the upward trend in wages growth appeared to have stalled” while both Australia’s unemployment and underemployment rates could be lower.

This opens the door to the RBA cutting interest rates further in 2019/20, below their current all-time low of 1.0%, perhaps down to 0.5%.

Attack on Saudi oil field weakens the Aussie

In addition, another reason why the pound to Australian dollar interbank exchange rate rose this week is because there was a drone strike attack on Saudi Arabia’s second largest oil field last weekend.

This cut Saudi Arabia’s crude oil production capacity by more than half, and lifted the price of a barrel of Brent crude by +13%. US President Donald Trump has blamed Iran for the strike, and said that the USA is “locked and loaded” to respond on Saudi Arabia’s behalf.

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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.