The decision was well overdue given the strength of the Aussie Dollar and AUD buyers are now in a much better position to purchase.

RBA Rate Cut and Budget Release

I have been saying for a while that the Reserve Bank of Australia needed to cut interest rates and this week they finally decided to change policy and cut interest rates from 2% to 1.75%. The strength of the AUD has clearly caused problems for the economy down-under and with inflation falling the RBA brought in the cuts.

This saw GBPAUD rates hit their highest level to buy Australian Dollars since mid-February. The Chinese economy has been faltering and during the last few weeks this has not had the usual negative impact on AUD exchange rates. However, the rate cut has now had the desired impact and I think we could further AUD weakness ahead.

My belief is that the Australian economy will still need further stimulus as the Sydney and Melbourne property market which have been booming in recent years have started to see a fall in house prices and this could signal the end of the property boom down under.

Indeed the Budget has also been announced in Australia and this has not gone down as well as expected. The aim is to settle the economy but with the RBA rate cut preceding the Budget the currency pair of GBPAUD has overlooked it. The budget has been seen by many as political to help Turnbull in his next campaign. The budget includes cutting rate of tax for higher income earners and squeezing revenue for from wealthy superannuants/pensioners.

Indeed, it now looks more likely that Malcolm Turnbull may call an election by July, which is likely to cause uncertainty for the Aussie Dollar. If we look back to when the UK election took place the uncertainty caused the Pound to fall by as much as 4% in the run up and then this quickly reversed when the polls concluded. Therefore I think we are in for a difficult period ahead for the Aussie Dollar and we could se GBPAUD rates rise even further.

The recent Interest rate cut has created the perfect environment to purchase AUD, speak with one of our currency brokers today on 01494 725 353 to discuss your requirements or email me here.

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