Reserve Bank of Australia to cut interest rates tonight, how could this impact Pound to Australian Dollar exchange rates?

Australian Economy Likely to be Worst Hit But to Bounce Back Strongest

Reserve Bank of Australia interest rate decision tonight

The Australian dollar has been having a tough time against a number of different currencies recently. However, the pound to Australian dollar exchange rate has dipped as the AUD staged a small comeback during last week. It appears as though the issue of Brexit is causing investors to sell pounds, and this is in part why GBP/AUD exchange rates have moved in a negative direction last week.

However, major bank Westpac has suggested that the Reserve Bank of Australia (RBA) will cut interest rates at their next meeting due overnight. RBA governor Philip Lowe has hinted at further rate cuts as Australian growth has been struggling.

Domestic spending has also reduced. Governor Lowe went on to say last week ‘it is nevertheless likely that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieving more assured progress towards the inflation target.’ Australian unemployment has been struggling hitting 5.3% since February when the rate was previously at 4.9%.

Pound close to 3 year high against the Australian Dollar

The pound is just 3.5% from a 3 year high from the Australian dollar and GBP/AUD exchange rates have been trading comfortably above 1.80 in recent weeks. Current pound to Australian dollar exchange rates sit 1.826 on the interbank exchange. Later this morning the UK will release its third revision of GDP for the second quarter.

The prediction is for year on year growth to come out at 1.2%. Therefore, any change in the figure could cause volatility for GBP/AUD exchange rates. There could be some positive movement this week for the pound vs the Australian dollar as the RBA decide to cut interest rates and suggest that more rate cuts could be coming, this could cause weakness for the Australian dollar.

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