Tomorrow morning will see the latest Reserve Bank of Australia interest rate decision, which will likely see the interest rate held at 1.5%. More importantly will be the RBA’s latest assessment of the Australian economy and possible cuts ahead.
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Increased uncertainty from the Trade Wars and an increasingly negative outlook at home has prompted many commentators to speculate on whether the current neutral bias on hiking or lowering rates will turn more dovish, as the RBA is forced to cut interest rates to steady the economy over some rougher ground ahead.
The Australian dollar reacts to events in the global economy, as its general performance is linked to global demand for its raw materials like Iron Ore and Coal. Despite commentary over the weekend the US-China trade wars could reach agreement, the negative consequences from greater concern over the global economy should continue to hang over the Australian economy and its currency.
The pound to Australian dollar rate fared very well last week, rising to the best levels to buy Australian dollars with pounds since June 2016. Sterling benefited from the increased confidence over the outcome on Brexit but remains very at risk from poor UK data and ever-changing Brexit sentiments.
No-deal is still a possibility and Mrs May is in an weak position politically. The market was grateful for some better news last week but so far nothing is completely confirmed and the pound could still falter. However, so long as the higher expectations on Brexit from last week can be validated, sterling should remain confident and might well push higher against a weaker AUD.
For the GBPAUD pairing, much will depend on the outcome from the RBA decision on Tuesday morning as well as Thursday’s ECB decision. Friday’s US data might also drive sentiment on this currency which takes its cues from global events.
Clients interested in GBPAUD could see the 1.90 level tested before long, but should be aware of the potential for unexpected news to send us back to the 1.80 mark. If you have any GBPAUD transfers to consider, please get in touch for the latest news and events to move your rate.
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