Daily Archives: May 2, 2019

GBP to AUD Forecast – Dollar Weakness before RBA Interest Rate Decision

The pound to Australian dollar exchange rate has made excellent gains this week with rates for the GBP AUD pair breaking over 1.86 once again. Much of the positive movement has arisen from optimism that a compromise agreement between the Conservative and Labour parties will be reached and thus avoid the need for Britain to contest the European elections. If the withdrawal agreement can be voted through parliament with cross party support then this should be seen as positive for the pound and the markets are already starting to price in this outcome.

The existing withdrawal agreement keeps close ties between Britain and the EU and could see investment in Britain restored to past levels. The debate at the moment is whether the UK will adopt some form of a customs union which would result in a softer form of Brexit, something that should be seen as positive for the pound. Rates for GBP to AUD are likely to see further volatility as the detail of these cross party talks is revealed. There is the potential for a spike higher for GBP vs AUD on the back of a deal although gains are likely to be limited as Brexit will still take a considerable amount of time to deliver. Remember, the withdrawal agreement will only then take Brexit negotiations to the next stage which will cover the thorny issue of trade and this could see another highly volatile period for the GBP to AUD pair.

Today does see UK local elections and reports indicate that the conservative party could lose a number of their councillor seats muddying the political picture if there is a general election or if the European elections do still go ahead.

The Reserve Bank of Australia (RBA) will meet next week and there is a chance of an interest rate cut which has resulted in Australian dollar weakness. Last week saw disappointing inflation data which is putting pressure on the Aussie and some commentators are putting the chances of a rate cut next Tuesday at 50%. Expect a big market reaction either way and if the central bank doesn’t deliver a rate cut then there could be a rally in the Australian dollar reversing some of the weakness in the Australian dollar. The RBA will be loathed to lower rates further unless absolutely necessary which makes this interest rate decision particularly interesting.

For more information on the Australian dollar and how to time your exchange at the optimum time then please contact me James at jll@currencies.co.uk

Australian dollar forecast : Will the Australian dollar rise or fall in May?

My view is that the Australian dollar could be on the back foot now as investors become more concerned about the RBA (Reserve Bank of Australia) cutting interest rates. The RBA will meet next Tuesday and there are some who think there is an increased chance of an interest rate cut, owing to some lower inflation numbers released in April. We also have the Australian election due on the 18th, the Australian dollar could therefore be in for a busy month.

The RBA has been in a holding pattern on interest rates for quite some time despite various changes in sentiment since 2016 when the RBA last cut rates. There has been continued speculation the RBA would need to cut again following increased concerns over the economic outlook in Australia, following the trade wars between the US and China.

With the trade wars concerns gently fading under the impression the two sides will strike an agreement, there has been less pressure on the Aussie dollar in recent weeks but the backdrop of such issues looks like it will continue to weigh on sentiment. Even if the US and China do pass a new deal, it is clear that global trade has changed forever under Trump, and the Aussie dollar as a currency so closely linked to global trade, will continue to be influenced by this news.

For me, May is more about the domestic issues facing Australia with low inflation prompting analysts to believe a cut is the way forward for the RBA. Whilst I am not overly confident the RBA will cut, I expect they will comment that they may well do in June, which I believe will weaken the Australian dollar.

The election on the 18th May is also a reason for concern in May, with the Labour party looking to perform well which could well have a negative outcome for the Australian dollar, since they have numerous plans to spend more. The election is likely to be a very topical even over the next 2 weeks and may well sway the Aussie dollar, increased volatility should be expected.

May looks set to be a very busy time for the Australian dollar so if you have any transactions that you are considering, please do not hesitate to contact me to discuss the latest news and forecasts, which will influence the value of your transfer. I work as a currency broker and can offer guidance as to some of the best strategies to consider when making an Australian dollar currency transfer.

Thank you for reading and please contact me directly to learn more on jmw@currencies.co.uk

Jonathan Watson