Are GBP/AUD Rates Heading for 1.95 by Christmas? (Matthew Vassallo)

Could this Key Week for Brexit Negotiations Impact AUDGBP?

It’s been a volatile time for GBP/AUD exchange rates recently, with uncertainty surrounding the Australian economy handicapping any AUD spikes. Sterling has gathered momentum over recent weeks with the pair now floating around 1.90 on the exchange, providing some of the best buying levels of the past four years.

The Reserve Bank of Australia (RBA) have already stated they feel the AUD is overvalued and the aggressive move on GBP/AUD rates during yesterday’s trading, we saw over a cent swing with the Pound hitting 1.9073 before dropping away very quickly below 1.90, could be attributed to this. We also need to consider that the RBA could well cut Australian interest rates early in 2015, which is causing uncertainty amongst investors. Current rates already stand at a record low of 2.5% but this is likely to drop further, as the Australian central bank look for measures to combat on-going economic difficulties inside the Australian economy and further afield.

In fact it is the Asian markets, in particular China’s demand for Australia’s raw materials, which can drive AUD exchange rates. The Australian economy has always relied heavily on the export of its vast supplies of raw materials. If this demand slows then quite simply the Australian economy will suffer because of it.

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