The pound to Australian dollar interbank exchange rate stands at 1.8799 today. By comparison, back on Wednesday 8th, sterling was as high as 1.9154 versus the so-called Aussie, so it’s since lost out by 1.85%, or by around 3.5 cents.
GBP has declined in value against the AUD, partly because it’s forecast that UK economic growth was flat in November, ahead of office statistics released this morning.
According to financial market estimates, UK GDP (Gross Domestic Product) remained at 0.0% in late 2019, although there’s a risk that Britain’s economy may have shrunk by 0.1% that month.
For example, economist Sanjay Raja says that “We continue to see the economy contracting in November, with GDP shrinking by 0.1% m-o-m. The drop is a result of car factory shutdowns as well as a drop in services activity.” So this has weighed down the pound, ahead of this release at 09.30 GMT.
Pound Weakens as BoE Increasingly Tipped to Cut UK Interest Rates
In addition, the sterling vs Australian dollar interbank exchange rate has also lost out, following Bank of England Governor (BoE) Mark Carney’s unexpectedly downbeat speech last week.
Speaking at a BoE Research Workshop last Thursday, Mr. Carney said that, if the UK economy doesn’t accelerate in early 2020, this could prompt a “relatively prompt response” from the central bank.
This suggests that the BoE may cut UK interest rates below their current 0.75%, back to their all-time low of 0.5%, if the UK economy doesn’t grow faster in the coming months.
Over the weekend, Mr. Carney’s colleague at the BoE, Gertjan Vlieghe, echoed his remarks, saying that he’d vote to cut interest rates, if there’s no sign of a UK post-election rebound.
AUD May Be Affected by Ongoing Bush Fires in Australia
Turning Down Under, the Australian dollar has strengthened versus sterling on the interbank market, even though bush fires continue to wreck millions of acres of Australian land.
It’s thought that the bush fires could slow Australia’s economy in 2020, as households and businesses respond by doubling down and spending less, while the wider country focuses on aid and relief efforts.
Moreover, it’s also possible that the Reserve Bank of Australia (RBA) will cut interest rates below their current 0.75%, to support the economy too. Typically, lower interest rates weaken the AUD.
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