The expectations for the Australian economy have worsened with increasing expectations that the Reserve Bank of Australia will be forced to cut interest rates later this year. Whilst the RBA have remained in a neutral stance at their interest rate meeting this week, positioning themselves in neither a hawkish (likely to raise) or dovish (likely to cut) manner, the global economic outlook tells a slightly different story.
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The Australian economy and currency is largely influenced by the relative strength or weakness of the global economy. Rising and falling demand for key exports like coal and iron ore from China, Australia’s largest trading partner, dictates its economic strength.
Recent increasing concern over the global economic outlook has dampened expectations for what lies ahead. Overnight Chinese exports fell by 20%, in their year on year figures, providing headaches for Australian policy makers, and signalling the effects the Trade Wars are having.
It has very recently been the best time to buy Australian dollars with pounds since the slide in the value of the pound following the EU vote, nearly 3 years ago. A weaker Australian dollar has encountered a more buoyant sterling, which has risen on hopes of a 'softer' Brexit.
Despite this dramatic turnaround of 14 cents improvement, the potential for volatility on both currencies ahead is high. There are no guarantees that next week will be positive for the pound, and it could be argued that the good news is already priced into current levels. Any more negative sentiment could quickly destabilise the confidence and send the interbank rate back down.
If you have a pound to Australian dollar currency transfer to consider, please don’t hesitate to get in touch to discuss all of your options ahead of these historic times.
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