Yesterday as expected the Reserve Bank of Australia cut interest rates to 1.25% and expectations are growing of possibly two more interest rate cuts during the course of this year.
What does the interest rate cut do for pound to Australian dollar rates?
Indeed, the next two predictions are for August and November, so we could see a very different monetary policy by the end of this year.
RBA governor Philip Lowe has come out to say that the central bank cut rates ‘to support employment growth and provide greater confidence that inflation will be consistent with medium-term targets.’
This means that there is a lot of support for further interest rate cuts. However, as yet the predictions have not caused too much movement for GBP/AUD exchange rates.
Will cutting interest rates help Australia’s struggling housing market?
The housing market in Australia has really been suffering in recent times. According to some reports property prices in Sydney have dropped by 15%. Meanwhile in other parts of Australia property prices have fallen by 20%.
Cutting interest rates may give the housing market a lift but I think this rate cut won’t make too much of an impact in the short term.
Typically, when a central bank cuts interest rates and is forecast to cut them again this would lead to the weakness of the currency involved. Therefore, some people are questioning why the Australian dollar remains strong.
UK politics causes weakness for pound to Australian dollar rates
The real problem for the pound lies in what is happening politically in the UK at the moment.
We are now in the midst of a leadership election with 11 candidates in the mix. It appears as though the front runners are all Brexiteers. Indeed, Boris Johnson has claimed if the government does not deliver Brexit this year this could cause huge problems for the Tory Party in the future.
Therefore, whilst the leadership election takes place I think the Pound will remain under a lot of pressure. We could even see pound to Australian dollar rates drop below 1.80 on the Interbank level. If you need to buy Australian dollars in the near future it may be worth getting this organised very soon.
Having worked for one of the UK’s leading currency brokers since 2003 I am confident of being able to save you money when buying Australian Dollars compared to using your bank.
Therefore, if you’d like a free quote then contact me directly and I look forward to hearing from you.