The pound is still struggling against most major currencies including the Australian dollar as both sides of the currency pairing battle it out to be the best of a bad bunch. Since the sterling highs against the Australian dollar in May of 1.8881, the pound to Australian dollar exchange rate has fallen to current levels of 1.7688 due the increasing uncertainty over Brexit.
New UK Prime Minister to be announced next week
With the UK poised to announce a new Prime Minister next week there is an argument to say that this will at least bring a little political certainty to the UK, however with Brexit still hanging in the balance it is hard to see this make any huge changes to the value of the pound until there is further progress made.
Reserve Bank of Australia interest rate cuts affecting GBP/AUD rates
The RBA in Australia have notable made their move to cut interest rates on back to back occasions which has in turn weakened the Australian dollar against a number of major currencies. There are still expectations that the RBA will move again before the end of the year, for those readers that are not aware, generally an interest rate cut can generally be seen as a negative for the currency concerned and the markets generally move on speculation as well as fact, so even the mere expectation of a cut can lead to weakness.
Blackrock, the world’s biggest money manager has stated that they feel the RBA would have no hesitation in cutting interest rates below 1% and that they feel the Australian dollar could have much further to weaken in the coming months.
Pound to Australian Dollar forecast
There is an argument to say that if the UK get a new PM and he starts making progress with Brexit then the pound could make up a lot of ground on the Australian dollar, but for those that are waiting to buy Australian dollars I would not rely on this, because actual Brexit progress has been few and far between since the referendum.
My view is that if the UK avoids no deal and gets an agreement in place then a move closer to 2 would not be out of the question later in the year, but there are many potential banana skins along the way, inclusive of ‘no deal’ that may weaken the pound significantly.
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