This week pound to Australian dollar mid market exchange rates reached as high as 1.8870, which is the highest rate seen since the UKs referendum in 2016. This article will highlight the reason why pound to Australian dollar exchange rates are close to a 3 year high and the likelihood of GBP/AUD reaching 1.90 in the upcoming weeks and months.
Since the start of the year the pound has gained traction against most major currencies including the Australian dollar as UK Prime Minister Theresa May has shown her hand by keeping the UK in the European Union for the time being as she is not prepared to leave with no deal.
Australian dollar under pressure
In addition, the Australian dollar is under severe pressure for many reasons. The Housing market is forcing the Reserve Bank of Australia to keep interest rates on hold and the RBA have even hinted to cutting interest rates in the upcoming months to stimulate growth. Furthermore, the Australian dollar has been losing ground against the US dollar, as investors unwind their carry trades now that US interest rates are higher than Australia’s and they are concerned about the trade war between the two largest economies.
To summarise the pound has gained traction and the Australian dollar has lost value since the start of the year. Looking further ahead, I can’t see much change in Australia’s circumstances therefore I expect the dollar could continue to lose ground. However the ongoing Brexit saga is the main talking point in the UK and trying to second guess what may happen in the upcoming months is difficult. No surprises the UK government have now announced the UK will take part in European elections. In my view I think this indicates that the cross party talks have failed and that’s why the PM plans to put the future direction of Brexit in the hands of MPs within Parliament. Therefore I expect more debating but unfortunately no concrete path forward so I cant see how the pound will gain much more value in the upcoming months.
For clients that are buying Australian dollars short term, an opportunity has presented itself and as I don’t see the pound gaining further value and anything could happen in regards to Brexit, therefore if you are comfortable with current rates trading sooner rather than later seems wise. If you would like a quote feel free to fill in the form below.