Overnight the Reserve Bank of Australia (RBA) released their latest minutes, with Governor Philip Lowe shortly after delivering his monthly speech.
How will RBA interest rate cuts affect pound to Australian dollar rates?
No surprises the tone was fairly dovish and the RBA hinted that they should have cut interest rates earlier in the month, however they weren’t prepared to do so due to the General election. However, now that the election is over a rate cut in June is now close to being fully priced in and a second cut is expected later in the year. When a central bank cuts interest rates you tend to see the currency devalue. However, as the RBA have been very forward so clients shouldn’t expect major falls when the cuts occur as speculators would have traded their positions before the event.
Pound to Australian dollar exchange rates may continue to fall
Over the last 2 weeks pound to Australian dollar exchange rates have been on the fall. At the start of the month GBP/AUD mid market exchange rates reached 1.8870 and currently GBP/AUD is now trading at in the mid 1.84s. To put this into monetary value a £200,000 into Australian dollars generates AU$8,400 less. Some of my clients have been holding off until this week waiting for the General election result and the latest minutes from the RBA. Now that it appears that the Conservatives may form a majority government this is seen as a positive for the Australian dollar and for clients buying Australian dollars now may be the time.
Theresa May set for failure once again
Early next month MPs within UK Parliament will vote on UK Prime Minister Theresa May’s deal for the 4th and in my opinion the final time. Reports in the UK are suggesting that MPS will not support the Prime Minister once again and her position as PM could be coming to an end. Mrs May has already announced that she will outline her departure timetable after the vote. If that ends up being with immediate effect, I expect the pound to suffer as the chances of a Brexiteer taking over no10 is extremely likely.
If you are buying Australian dollars short term, just remember that pound to Australian dollar exchange rates are over 11 cents higher than where they were at the beginning of 2019. For this reason, I expect there is scope for rates to fall if Theresa May resigns and a Brexiteer takes over, therefore securing short term Australian dollar positions may be wise. If you would like to speak to me regarding any of the factors affecting GBP/AUD rates, you can contact me directly using the form below.