Will we see further interest rate cuts this year?

The Reserve Bank of Australia has had its messages mixed up for the public to hear, creating some doubt as to whether any further interest rate cuts will take place in the Australian economy in the near future. The RBA in its monetary policy statement following the decision to cut interest rates earlier this month justified the decision because they expected a period of slower growth up until mid-2018.

Yet in the minutes this was heavily contradicted, with all members seemingly agreeing that growth would see a resurgence back to 4-5% levels by mid-2017.

The difference is significant. Whilst there is always the chance that the minutes were simply noted down unclearly, this is a very optimistic view from the RBA compared to the morbid forebodings of previous meetings.

As such this news should be welcomed by Australian Dollar sellers as this lowers the likelihood of further interest rate cuts appearing and the AUD weakening as a result. Confidence that Australia will continue to maintain interest rates six times higher than that of the UK should keep GBP/AUD down at these attractive selling levels in the medium term unless we see a dramatic turnaround in the UK’s economic fortunes.

What can we expect in the short term of Australian Dollar buying rates?

On Thursday employment data for the Australian economy will be released, reflecting on the ability for the economy to soak up potential workers during the month of July. At the moment there seems to be a forecast of little change, with only 11,000 jobs expected to be added and no change in the overall employment rate.

This is hardly surprising, since the Australian economy tends to see the largest swings in employment during their summer and the high tourist season. However, given the above confusion about economic growth, a significant amount more or less jobs added could have a dramatic effect on the value of the Dollar. For example a strong showing could hint that the RBA’s optimistic view for the economy may be realised, and the Australian Dollar’s value could continue to push against the Pound.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353.


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