The month of May has seen the pound steadily falling against the AUD, as it has done against most of its major counterparts, but yesterday saw the pound recover some of these losses after the Royal Bank of Australia (RBA) Governor, Philip Lowe, announced that they will ‘consider the case for lower interest rates’ at their June monetary policy meeting in two weeks’ time.
|Currency Pair||% Change (Month)||Difference on £200,000|
Since 2011 the RBA has been on a steady path of cutting rates to help drive inflation and boost the jobs market, but there hasn’t been a change in rate policy since 2016, when Lowe took office. Historically, when a Central Bank cuts interest rates this has the potential to weaken the currency in question as it becomes less attractive to investors who are seeking a high return on their investments.
In a speech during the early hours of yesterday morning, Lowe stated that the main concerns for the RBA were to boost inflation and help reduce the unemployment rate. May’s inflation numbers came in extremely low, whilst the most recent unemployment rate showed a second consecutive month of rising.
There is very little data to come out of Australia this week and next before the interest rate decision on June 4th, so it is likely to be rumours and predictions of what could happen to rates that impact the market.
The majority of the rate movement for GBP/AUD rates following Lowe’s speech occurred in the early hours of yesterday morning, but we have contract options available that can help you take advantage of spikes in the rate, even when our trading floor is closed, or you are fast asleep.
Contact your account manager to find out how you can take advantage of such contract types.
With very little data coming out of Australia in the coming weeks, it is likely to be political developments in the UK driving market movement short-term. The upcoming European elections and uncertainty over Brexit are weighing on the pound and could continue to have an impact on rate movement.
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