As the Reserve Bank of Australia (RBA) cut interest rates overnight, there is a fair bet that there could be even more cuts up ahead.
Investors are bracing themselves for further uncertainty leading to the RBA taking the necessary decision to cut interest rates, to help stabilise the economy. In his commentary afterwards, Governor Robert Lowe, pointed out ‘subdued’ inflation figures, that have with rising unemployment created the conditions for a cut.
Pound to Australian dollar rates have trickled down lower, presenting Australian dollar buyers with more headaches. It is tempting to think of the Aussie dollar as lower owing to the threat of interest rate cuts increases. However, by not going too far in confirming any future hikes, the Australian dollar has actually gained, and with sterling struggling, GBP/AUD exchange rates have nudged the 1.80 interbank rate this afternoon.
Pound Sterling weakens following Mark Carney’s comments
GBP has had a poor run of form today, with Mark Carney indicating to the market that interest rate cuts could be on the horizon. Sterling has lost value against all currencies today. Interest rates are a key feature on exchange rates and whilst the pound to AUD rate had been driven by the threat of Australian cuts, because these were expected, the impact on the market has not been as substantial.
Looking ahead, the market will need more clarity on the issues of interest rates, as well as further information regarding Brexit and also the Trade Wars. Investors are finding it is not just domestic issues for both currencies, these bigger issues of Brexit and the Trade Wars are also important consideration and also challenging to begin factoring in.
GBP/AUD rates could find themselves dropping below the 1.80 level and the 1.70 territory could become more comfortable should the RBA appear to be holding off on future hikes, particularly with recent improvements of confidence from the trade wars negotiations with Trump.
If you have any questions about anything you have read in my pound to Australian dollar forecast or would like to know more about GBP/AUD rates, please feel free to contact me directly using the form below.