This year the Reserve Bank of Australia (RBA) has continued to cut interest rates leaving the base rate of interest down under at a record low of 1%.
The tightening of monetary policy has so far failed to stimulate the Australian economy which has contributed to the RBA board discussing alternative methods of stimulus to try and help the ailing economy.
There are now plans to potentially implement quantitative easing which is what the ECB (European Central Bank) has been doing for some time now to boost the Eurozone economy. The minutes of the RBA’s July meeting revealed that these ‘unconventional monetary policy measures’ were discussed so the RBA is prepared to use them if required.
Historically the RBA has only amended interest rates to slowdown or stimulate the Australian economy. The RBA could potentially plan to; purchase government securities, provide longer funding to banks and to intervene in foreign exchange markets to reduce the chances of a recession.
Both the pound and the Australian dollar are under pressure at the moment, although for different reasons as the Australian dollars troubles are mostly due to economic uncertainty as opposed to the UK’s ongoing political issues.
Over the past year the GBP/AUD rate is almost flat although in recent months the Aussie dollar has mostly benefited from sterling weakness which has kept GBP/AUD below 1.80 for almost 2-months now.
Should a last-minute deal between the UK and the EU be struck and the US-China trade wars continue, we could see the 1.80 level tested again. Do feel free to get in touch if you wish to be updated regarding any market movements between the pair.