The pound to Australian dollar exchange rate has suffered as the AUD has made significant gains against sterling of late, this is most likely down to sterling weakness as opposed to AUD strength.
Long term low interest rates from the RBA
Australia’s economic outlook is not very optimistic. There is a heavy reliance on China purchasing its exports. Any slow down in Chinese growth has a knock on effect to the Australian economy. The US China trade war has the potential to escalate and prolonged which does not bode well for the Aussie.
There are also inflation issues, Reserve Bank of Australia Governor Philip Lowe has committed to long term interest rates to try and boost inflation up to the 2% target.
Boris no deal threat continues to hurt the Pound: Will the Pound recover?
Despite this, sterling remains weak and could be set for further losses. With Boris threatening a no deal in order to negotiate a better deal with Brussels sterling is losing ground against the majority of major currencies. General consensus is the higher the probability of a no deal the weaker the pound will become.
Brussels continues to state there will be no concessions on the current deal despite Johnson’s threat. It is not in Brussels interest to offer the UK a favourable deal as other nations may follow suit. For example, Italy may consider leaving following Brussels threatening to impose large monetary fines, in the billions due to Italy’s debt exceeding parameters with Italy’s debt now exceeding GDP.
If a deal does not come to fruition, there is the likely hood a no deal would be blocked by parliament. If this does occur, we will be looking at a general election which will no doubt add to sterling’s woes s political uncertainty increases.
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