Last night the Reserve Bank of Australia (RBA) chose to once again cut the interest rate in Australia. Before the event in the early hours of the morning a second cut back to back was priced in to 78% by markets according to ING Bank.

Currency Pair% Change (Month)Difference on £200,000
GBPAUD1.98%AUD $7,180

Having previously cut rates at the last central bank meeting there was always a strong chance that a further reduction may be required. The interest level now at 1% is a historic low and makes Australia the 6th lowest rate only 0.25% above the UK.

This morning banks and analysts around the world have been providing their thoughts, with many suggesting that there could be a further cut before the end of the year with some saying it will be 0.5% by 2020. The markets didn’t really respond too much to the cut as it was already priced in.

Trade wars a potential negative trigger but US Consumer Confidence remains high

RBA Governor speech

RBA Governor Philip Lowe will deliver a speech in the next few hours providing his latest thoughts on the interest rate decision. The Australian economy has a unique set of challenges when you consider how many external factors have an impact on the economy.

The truce between the US and China will certainly help to find the AUD a little bit of confidence however no one is overly sure what could come next in the trade war between them. GBP/AUD over the last 9 months has seen the interbank rate at the low 1.70’s with the high just below 1.90, at the moment the interbank level sits directly between those two. The high was more recent than the low, with sterling negativity more likely the reason for the movement in the rate rather than Aussie strength.  

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