Australian Dollar Supported on RBA Interest Rate Outlook (James Lovick)

The Australian dollar continues to find support on a growing expectation that the Reserve Bank of Australia (RBA) will have to follow in the footsteps of other central banks and raise interest rates later this year. There is a view that the first rate hike could come as soon as June 2018 and this prospect in my view should help support the dollar. Those clients targeting a rate of 1.80 for GBP AUD may be disappointed although a more realistic level of 1.75 could still be manageable in the coming months on the condition that the pound is boosted on positive Brexit discussions.

Australian data and US data has been slightly mixed of late so it will be interesting to see business confidence figures tomorrow morning from National Australia Bank. Aussie retail sales numbers should also help paint the economic picture down under on Thursday.

Clients looking to buy or sell Australian dollars with pounds should pay close attention to political developments in the UK. The ongoing Brexit negotiations will continue to be a major driving force for GBP AUD throughout 2018. Discussions will now move on to the complicated issue of trade between Britain and the EU and any developments here are likely to see considerable volatility for the pound. Further progress which suggests that there will be a deal between Britain and the EU could see gains for the GBP AUD although the reverse is very true.

Any breakdown in talks is likely to see the pound weaken if it appears the prospect of a deal is moving away. There is currently a reshuffle taking place within Theresa May’s government with more changes expected later today. There are rumours that here may be a ministerial position for leaving the European Union without a deal. This highlights that it could be a rocky road ahead for sterling Australian dollar exchange rates.

To discuss how these events are likely to impact on your currency requirement and to discuss achieving the best rates then please feel free to contact me at jll@currencies.co.uk

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