Pound to Australian dollar forecast: RBA cuts base rate to historic 1.25% low

GBP AUD Lower on RBA Governor Rate Outlook

The pound to Australian dollar is fractionally weaker following the decision by the Reserve Bank of Australia (RBA) to cut interest rates to fresh lows of 1.25%.

Will the RBA introduce further cuts later this year?

The move, which was widely anticipated has seen the currency drift slightly lower, but investors will now be poring over the decision, and seeking to anticipate the next move.

There is speculation that the RBA might even begin to cut rates further in the future, particularly if the Australian economy continues to suffer at the hands of the trade wars. The Australian economy has suffered with low inflation and low growth as uncertainty increases and the global economy struggles. Only recently the IMF and the OECD, have both cut global growth forecasts to 10-year lows.

Pound to Australian dollar forecast

The pound to Australian dollar rate has also been drifting lower in the last couple of weeks as the pound loses value amongst a large amount of uncertainty globally relating to the outlook on the UK political scene. Investors are concerned about the direction that UK politics is taking with no clear sight of the ultimate destination the Brexit journey is leaning towards.

There is a chance that GBP/AUD levels will rise back to the mid 1.80’s if the Australian dollar weakens but it does not appear too likely that sterling will be in any position to capitalise quickly. Expectations for the pound and the UK are likely to centre around Brexit and until we get more clarity sterling does seem destined to struggle.

I believe 1.80 will hold for the time being but might well quickly lose its position and edge lower should signs of a no-deal Brexit increase. Clients looking to buy or sell Australian dollars in the future might benefit from a review of their situation, since the outlook in the market is unclear, and the market sentiments on both currencies might well change quickly and suddenly.