Pound to Australian Dollar exchange are once more on the back-foot after a few days of welcome stability. Once more a third party in the GBP/AUD relationship, the USA has stirred the pot with some controversial events of their own, driving vast sums of capital onto the Australian Dollar’s shores.
The Federal Reserve Bank of America were the first major Central Bank to raise interest rates since the financial crisis, and this year, they have since raised rates twice more. Initially forecasts of four hikes were keeping the Dollar strong, but some revisions downwards of expected growth in the US, most notably recently from the IMF, and current political instability, is shedding doubt on either of the next two actually occurring this side of 2018.
Why does this impact AUD/GBP rates?
In this world of low interest rates, the discussion on when the next rises will be are key for investor activity, which in turn affects the supply and demand which governs the value of any particular currency.
The Australian Dollar currently enjoys a relatively high interest rate compared to other currencies, and had previously been losing some value, with expectations of interest rates rises in more stable currencies such as the US Dollar driving investor activity elsewhere.
Here the converse is now true, with lowered expectations of any further rises at all in the US, down to just 50%. Spooked currency investors and high street institutions chose Australian Dollars as an alternative options after 7pm GMT yesterday with the release of the FED’s latest interest rate decision and monetary policy statement.
With a few more global currency markets still expected to open to trade on the news, then it is likely that rates should be ahead of where they were this morning for Australian Dollar sellers by midday, creating further opportunities to sell at highs not seen for a few months.
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