Australian Dollar fails to make inroads against the Pound
The Pound to Australian dollar exchange rate has remained stagnant as the AUD has failed to find much of a footing of late against GBP, despite the on-going uncertainty surrounding Brexit and the knock on effect this has had on the pound’s value against most of the other major currencies.
Despite the market remaining sceptical about Sterling’s short-term prospects, it has still managed to make inroads against the AUD over the past week, with GBP/AUD rates closing in on 1.80 overnight.
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Whilst the AUD did find some support under the key 1.80 threshold, it would seem that the reserve bank of Australia’s dovish outlook and record low interest rate is heaping pressure on the AUD, with investors risk appetite shrinking in line with Australia’s future growth forecasts.
With the Reserve Bank of Australia cutting rates again at their last policy meeting to a new record low of 1%, the central banks plan was to tighten their monetary policy in the hope that it would help to stimulate the Australian economy. So far, these attempts have failed to boost economic growth and there are no plans being discussed to potentially implement a Quantitative Easing (QE) programme.
This monetary injection would be put in place to help support the Australian economy through its current downturn but would likely be seen as a sign of weakness by investors. This in turn could cause a further sell-off of AUD currency positions, thus weakening its position against GBP further despite the deep-rooted concerns surrounding the UK economy at present.
There is also a growing concern that the US/China trade-standoff is going to have longer -term negative implications on Australia’s economic growth, due to the heavy trade links between the two nations.
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