Pound to Australian dollar exchange rates have worsened dramatically since the more historical trends. As a young man, I spent many enjoyable months in Australia when the pound was equal to around 2.5 Australian dollars on the interbank rate. At present, the pound to Australian dollar rate sits at 1.7866 on the interbank rate, widely accepted as a big shift, even by the currency markets wide interpretations.
UK political uncertainty weighing on Pound to Australian Dollar rates
The pound to Australian dollar exchange rate has been largely driven by numerous factors but a significant factor, generally accepted in the market, would be the changes in the UK political situation. Whilst the Aussie has been stronger against sterling, long before the word Brexit was even known, the more recent shifts have been attributable to this event.
Further ahead, events on Brexit may play a role in the behaviour of the pairing. The current no-deal expectation has seen sterling lower, and signs that it might be becoming more likely may harm the pound further. Any signs that perhaps a deal might be struck, or for some reason no-deal looks less likely, might see the pound finding form. This is based on the previous behaviour of sterling which had seen the pound rising when a Brexit extension looked likely.
Will the RBA cut interest rates further?
Next week is the latest RBA (Reserve Bank of Australia) meeting minutes, which might provide some further insight into the likelihood of further interest rate cuts. The 1% Australian interest rate level has seen the currency lose ground and any signs of further cuts ahead, would in theory lead to a weaker Australian dollar.
Economic theory states that generally speaking, a lower interest rate, makes a currency less attractive to hold. Therefore, clients looking to buy or sell Australian dollars and pounds, could be in for some volatile tome ahead, as the market struggles to price in the ongoing changes for both currencies.
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