GBP/AUD crashes from delay in UK interest rate hike (Steve Eakins)

Will Sterling Weakness Continue to Help the AUD to GBP Rate Improve?

GBP/AUD rates have fallen into 2.12 territory from starting the day at 2.15, and seem set to fall further still when US and Australian markets open to trade on the terribly negative news about the UK interest rate timeline.

Arguably, the most important single determinant of a currency’s value since the 2007/8 financial crisis has been when interest rates are likely to rise once more from their historic lows. This is why Sterling lost value across the board this afternoon when Mark Carney, the Governor of the Bank of England, announced that interest rates in the UK economy would likely remain as they are until at least 2017 – very different from his hints up until recently of an early 2016 hike.

The main reason cited was the worrying low levels of inflation in the UK economy, now the worst since records began, as well as uncertainty caused by the Chinese slowdown.

The Australian Dollar is now a currency poised to make gains against its counterparts in the coming months, particularly Sterling. By contrast to the Bank of England’s Governor, the Governor of the Reserve Bank of Australia Glenn Stevens has been on the offensive – pointing to the likelihood that interest rates will be staying at their 2% despite the slowdown in China, due to strong employment figures, and much healthier inflation figures than the UK.

As a comparison, the UK’s interest rates are at 0.5%. Many investors will now be moving their capital into Australian Dollars in the hope of better short-term gains now that gains on the Pound are effectively off the table throughout 2016.

A delayed fuse on the Chinese slowdown, which initially allowed for GBP/AUD rates to reach these multi-year highs, are now causing issues for Sterling a few months later. Increasing demand for the Australian Dollar will continue to drive up its value against the Pound. Effectively, if you want to secure the best rates on GBP/AUD and still purchase well above 2.0, you need to be moving sooner rather than later.

I strongly suggest that anyone with AUD to purchase, even during the first half of 2016, should contact me on 01494 787 478 and ask the reception for Steve to discuss how these near multi-year highs on GBP/AUD can be secured ahead of your requirement in the coming months. We can formulate a strategy for your transfer and I can offer a competitive quote on your exchange. I should point out that I have never had an issue beating the rates offered elsewhere. hse@currencies.co.uk

AUD sellers can do the same, and we can discuss how to ride this trend in your favour over the coming months.