Australian dollar up against the pound but could have problems next week with Australian inflation data

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Australian employment data impact GBP/AUD rates

We have seen the employment change for Australia coming out better than expected, which has helped to give the Australian dollar a boost against the pound. Employment change figures confirmed growth of 25,700 and the unemployment rate remained the same as expected at 5%. The GBP/AUD rate is 1.81642 at the time of writing this article.

However, I think we could see the Australian dollar come under pressure next week when Australian inflation data is set for release. Previously inflation rates have been at 1.8% and next month we could see a fall to 1.5%. This is lower than the target level which has been set between 2%-3% for the mid-term target.

If we see a fall in inflation as predicted this could put further pressure on the Reserve Bank of Australia (RBA) to consider bringing an interest rate cut forward.

RBA preparing for interest rate cuts

As we saw earlier this week with the Reserve Bank of Australia’s minutes, they suggested that they may be gearing up for a rate cut this year. If inflation falls this could provide evidence in support of an interest rate cut and this could in turn see weakness for the Australian Dollar vs the Pound.

The RBA has kept interest rates on hold for over 2 1/2 years now and I think if inflation shows a fall next week combined with a slow down in the jobs market this could see the RBA bringing a rate cut in the near future.

During the last month the Australian Dollar has improved against the Pound by as much as 3% or the difference of £1,600 on a currency transfer of AUD $100,000.

This is down to a number of reasons including the ongoing saga of Brexit, an improvement in the outlook of the US-China Trade Wars as well as much better than expected Chinese GDP data this week which outstripped expectations.

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