The following report looks at factors that may impact the RBAs decision to cut interest rates.
For clients looking to buy Sterling with Australian Dollars the exchange rates are still close to the best they have been since Autumn 2013. However, although the British economy is under pressure following the Brexit the Australian economy is showing some mixed results recently. The Reserve Bank of Australia have been considering cutting interest rates recently and their next meeting is due to take place on 2nd August. The Consumer Price Index is published on Wednesday morning with the expectation for a fall from 1.3% to 1.1%.
Typically when inflation falls a central bank will look at cutting interest rates and this will often tend to weaken the currency involved. Therefore, if the data comes out lower than expected this could cause the Australian Dollar to weaken against the Pound.
The Australian economy has grown by 3.1% over the year and the jobless rate has fallen to below 6% but prices down under do not appear to be rising. Indeed, low prices mean that the economy is not as strong as the figures appear and lower than expected inflation means that an interest rate cut is fairly inevitable.
Australian interest rates are currently at 1.75%, which is the lowest in their history but the AUD still remains strong compared to the Pound. The target for inflation down under is between 2% and 3% and this is only the third time that inflation is outside the target since 1996. If you are thinking about selling Australian Dollars to buy Sterling then it may be worth organising this early in the week.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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