The pound to Australian dollar exchange rate has had a torrid time this summer, as mid market exchange rates have dropped 10 cents since the start of May. The pound has been losing value against all major currencies due to the ongoing Brexit Saga and only earlier this week the Bank of England issued the new Prime Minster Boris Johnson with a stark warning that a no deal Brexit will cause the pound to fall further.
Bank of England interest rate decision and comments
Bank of England Governor Mark Carney, has stated that a no deal Brexit would trigger a fall in economic output, inflation would rise and consequently the pound would fall. Furthermore, the central bank cut growth forecasts for this year and next and stated that there is a one in three chance that the UK will fall into recession next year.
Australian Inflation: What Could the RBA cut interest rates further?
As for the Australian dollar, recent inflation numbers gave the Aussie a period of relief this week as the numbers were released at 1.6%, slightly higher than forecasted. This is still a problem for clients selling Australian dollars as inflation is below the central banks target of 2-3%. When inflation is below target a tactic by central banks could be to cut interest rates, therefore if the Reserve Bank of Australia cut rates further you may expect the Australian dollar to continue to lose value.
Brexit fears weigh heavily on the Pound:
For clients that are involved in pound to Australian dollar currency exchanges, the ongoing Brexit saga may be the main driver for the next 3 months. Quite simply if the UK end up crashing out of the EU the Bank of England has forecast that the pound will continue to fall further. It may be more likely that MPs will block Boris Johnson’s plans, there could be a General election on the horizon if this was to happen. How this will impact the pounds value is difficult to predict, however there could be further volatility on the horizon.
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