Fears of No Deal Brexit continue to weigh on Sterling
The pound to Australian dollar exchange rates had fallen below 1.79 this morning, with the pound coming under increasing pressure this week. Sterling has seen its value decline of late, as fears of a no-deal Brexit continue to sap investors risk appetite for the pound.
The current downturn against the AUD, which has seen the pounds value tumble below 1.80, is a stark reminder of the current uncertainty around the UK economy.
The AUD is now trading at a six-month high against GBP, with a lack of clarity over the UK’s Brexit position and the current political uncertainty, causing a sell-off of GBP.
The current trend is a stark reminder of the complete lack of confidence the markets have in the UK at present, considering the AUD itself has struggled to make any impact against the majority of major currencies of late.
US China trade war effect on AUD
The Australian economy relies heavily on global trade and growth to prosper and with China being its largest trade partner, it has seen its economic growth stunted due to a slowdown in demand from China for its exports.
Recently, Donald Trump and Xi Jinping have made progress on a trade deal at the G20 summit. Both have taken steps to calm the current situation. It is likely that a deal is still some way off, although a likely deal would offer support to the Australian dollar.
RBA interest rates at record lows: How will another potential cut influence GBP/AUD exchange rates?
This has led the Reserve Bank of Australia (RBA) to cut interest rates to new record lows of 1% and with a further cut potentially in the offing at the central banks next policy meeting. If another rate cut is forthcoming, Australia’s base rate would be the same as the UK’s at 0.75%. This is a far cry from recent years when the Australian interest rates were seen as a major reason for international investment, but the current dovish economic outlook would usually cause the currency in question to come under pressure.
The fact the AUD has actually strengthened against GBP during this period, proof that the fear of a no-deal Brexit outweighs even some of the gravest global market concerns. If you would like to learn more on current factors influencing current exchange rates, or have an upcoming currency transfer, feel free to contact me directly using the form below.