Next week the Reserve Bank of Australia will release their latest interest rate decision in the early hours of Tuesday morning and clients that are converting Australian dollars should make a plan before this release.
|Currency Pair||% Change (Month)||Difference on £200,000|
Last week’s Australian inflation numbers disappointed. Lower oil prices at the end of 2018 is being labelled as the main reason for yearly inflation falling from 1.8% to 1.3%. Off the back of the news financial markets and bookmakers are now predicting there is a 50% chance of a rate cut. Past history tells us when a central bank cuts interest rates there is a high chance the currency comes under pressure. The last time Australian inflation came under this amount of pressure was in 2016 and former Governor Glenn Stevens cut interest rates to record lows. If Philip Lowe follows suit it could be a tough May for the Australian dollar.
In the UK Brexit continues to be the main driver for sterling exchange rates. Since the UK extended Article50 by 6 months the pound lost ground against most major currencies including the Australian dollar. This week cross-party talks between the Conservatives and Labour will continue.
So far there has been little sign of compromise between Theresa May and Jeremy Corbyn, but it’s important to understand that any major news could have a substantial impact on pound to Australian dollar rates.
The Bank of England will release their latest interest rate decision Thursday. No change is expected however the press conference from Mark Carney will be the main talking point. I don’t expect a key update from the Government in regards to Brexit therefore I expect the Governor to continue to state that the Central bank will react when appropriate. All in all, I don’t expect further clarity in regards to Brexit therefore this is unlikely to result in the pound strengthening considerably. However now that there is a high chance the Reserve Bank of Australia will cut interest rates next week, investors may sell off their Australian positions in advance. If you are buying or selling Australian dollars and want further information, feel free to contact the trading floor.
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