Sterling exchange rates have had a torrid time recently following the vote by the British people to leave the European Union.
GBPAUD rates were trading above 2 just prior to the announcement but since then have dropped by over 30 cents. Investor confidence has dropped significantly during this time and with the price of iron ore also increasing this has helped to strengthen the Australian Dollar.
Malcolm Turnbull has also been given another term by the Australian people which has also helped the AUD to improve vs the Pound.
However, during the course of this week the Pound has started to fightback. The announcement of new Prime Minister Theresa May helped Pound Sterling exchange rates against all major currencies as it provides the UK with a bit more stability certainly politically.
The announcement by the Bank of England also shocked the majority by keeping interest rates on hold compared to an 80% chance of a rate cut priced in.
To me however I didn’t think they would change policy just yet as with Theresa May only coming in officially a day before the vote a change in policy on Thursday would have caused too much volatility for the Pound and the British economy.
Next week on Tuesday the UK releases Consumer Price Index data which measures inflation levels. The expectation is for 0.4% year on year so any signs of a slowdown could influence the Bank of England to either cut interest rates or introduce further Quantitative Easing at next month’s meeting due to take place on 4th August.
I would not be surprised to see further QE at next month’s meeting and arguably this is already getting priced in so I expect the Pound continue to rally against the Australian Dollar during the next fortnight.
If you have a currency transfer to make and want to save money on exchange rates compared to using your own bank then contact me directly for a free quote. Tom Holian [email protected]
I look forward to hearing from you.