The RBAs decision to cut interest rates from 1.75 to 1.5 led to early GBPAUD strength but eased off in the latter part of this morning. Glenn Stevens is due to give a speech on Friday which could create further volatility for the currency pair.
In an attempt to boost the Australian economy, the RBA cut the interest rate from 1.75 to 1.5, with rates being reduced gradually now since October 2014. This caused the GBPAUD rate to significantly weaken at the time of the announcement, with rates almost touching 1.76.
Glenn Stevens, governor of the RBA added that business investment was the main concern as to why the RBA chose to intervene. In a bid to boost inflation, cutting interest rates is not uncommon, and is something that we have witnessed within the Eurozone in recent times. As mentioned in my Euro section, recent inflation data signals that lower interest rates do help to encourage consumer spending and can help to lift inflation.
This is the second to last board meeting before Glenn Stevens is replaced by Philip Lowe on September 18th. On Friday, Glenn Stevens will justify his reasons for the rate cut in the quarterly monetary policy statement.
Clients looking to buy Australian Dollars of late may have been left fairly disappointed since the referendum result in June 2016, when GBPAUD rates fell over 20 cents in the subsequent weeks. Generally speaking an interest rate cut means that holding that particular currency for investors becomes less attractive due gains made on the interest.
In theory, in the up and coming weeks investors will be unwinding their positions and selling their Australian dollars, which could provide AUD buyers with some fantastic opportunities. As previously mentioned, on Friday RBA Governor Glenn Stevens is due to speak and may give an indication into further monetary policy easing, I would expect his statement to cause volatility on the markets so anyone with an AUD requirement should be in close contact with a member of the team at currencies.co.uk.
Thank you for reading my Aussie Dollar currency report, if you have any questions about AUD exchange rates I would be more than happy to discuss them – you can contact me with any queries at firstname.lastname@example.org.
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