GBP/AUD Forecast – Westpac banks economic forecasts cause a sharp sell-off of AUD

GBP/AUD Forecast - Westpac banks economic forecasts cause a sharp sell-off of AUD

GBP/AUD Forecast: Sterling has made further gains against the AUD overnight and this morning, hitting a high of 1.8410.

This is a gain of over three cents in the past 24 hours, or the equivalent of an extra $3000 AUD on a £100,000 transfer.

This sharp drop can be attributed to Westpac, one of Australia’s largest banks, decision to cut forecasts for economic growth from 2.6% to 2.2% in 2019 and 2020 respectively. They also changed their interest rate predictions to show two rate cuts this year of 0.25% each. If this prediction comes to fruition it means that Australia will bring its already record low interest rate down to 1% by November of this year.

Investors were quick to react, selling off their AUD positions in haste following the negative outlook by Westpac.

What will be even more concerning to those clients holding AUD is that this development has occurred despite the on-going lack of confidence in the Pound due to Brexit. The level of uncertainty surrounding the UK’s impending, or potentially impending exit from the EU depending on the final outcome, has certainly been a major handicap for the Pound over recent years.

This has caused investors to limit the amount of Sterling they have been adding to their portfolios, which in turn has kept its value in check, with any sustainable rises against the AUD few and far between. Therefore last night’s move indicates the outlook for Australia’s economy and ultimately the AUD, outweighs any potential negative repercussion from Brexit and the subsequent potential negative fallout for the UK economy.

How the GBP/AUD pair develops from this juncture will have much to do with any prospective response from the Reserve Bank of Australia (RBA) who ultimately make the decision on whether or not the aforementioned interest rate cuts ultimately come to fruition or not.

Investors will also be keeping a close eye on any developments with Brexit and the potential impact these will have on Sterling’s value.

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