The Australian dollar has lost further momentum against sterling as the latest Australian Growth numbers disappointed overnight. GDP for the quarter was released at 0.2% down 0.1% and GDP for the year fell by 0.2% to 2.3%. This data release puts further pressure on an economy that is already struggling.
The slowdown in China due to the ongoing trade war with the US is causing investment to slow in Australia. The housing market in particular is under severe pressure and the Reserve Bank of Australia have hinted at cutting interest rates in the near future. I find it difficult to see how the tide is going to turn anytime soon in Australia therefore I expect further weakness for the Australian dollar.
Since the start of the year, GBP/AUD exchange rates have increased by 10 cents. For clients that are emigrating down under, they are now receiving an additional AUD $40,000 on a £400,000 transfer. But what next?
March is key for Sterling exchange rates
The next 2 weeks could shape the UK economy for many years to come. UK Prime Minister Theresa May and the Attorney General Mr Cox are trying to get further concessions from the EU at present as it appears that further concessions are needed if MPs are to vote in favour of Theresa May’s Brexit deal on the 12th March. If it’s the case in the upcoming days the EU give further concession I expect the pound to continue to increase in value and GBP/AUD rates to breach 1.90 as a deal is likely to be stuck.
However, if Mr Cox fails to achieve further concessions, its unlikely Theresa May’s deal will be passed, therefore MPs will vote on whether the UK will crash out of the EU on the 13th March. It doesn’t appear that there is the appetite in Parliament for a crash out Brexit, therefore I don’t expect this to pass with a majority. Nevertheless, if this was to materialise the gains that the pound has made against the Australian dollar will diminish and I expect we could breach the lower points we saw throughout last year 1.60.
If my predictions come true, I expect MPs to be voting for the third day in a row as MPs will not vote in favour of Theresa May’s deal or a crash out, therefore they will be voting in favour to extend Article 50. If this happens this could cause the pound to rally further against the Aussie dollar as the chances of crashing out of the EU would have completely diminished.
If you would like to discuss anything you have read in my GBP to AUD forecast, or need more information on the events affecting GBP/AUD exchange rates, please feel free to get in touch with me by sending me a message using the form below. I will respond personally.