The pound has slumped from the recent gains it had made against the Australian dollar over the last few weeks.
Brexit jitters are very much driving the pound lower and have done over the last week with concerns festering. Both UK and European rhetoric is becoming strong and battle lines are being drawn which is keeping pressure on the pound and preventing gains across all of the major currencies including the Aussie. Expect many more developments for GBP AUD directly as a result of Brexit.
Australia are now waiting patiently for the next US Fed rate decision where there is a slim chance the Fed could hike tomorrow evening. This is highly important for the Australian dollar as changes in the US have a direct impact on Aussie dollar exchange rates. Any rate hike in the US could see the Australian dollar weaken as funds return to the US where interest rates yields start to become greater.
My view remains though that there will be no change at the Fed meeting this evening. The US economic data has not been sufficiently strong enough to warrant a hike at this stage. November is also unlikely as the US presidential election will be in full swing. The US rate hike should therefore happen in December which will mark a one year anniversary from the last rate hike which was the first since the financial crisis of 2008. Having a three month window of no action should help support the Australian dollar in the meantime.
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