Sterling dropped today after inflation defied expectations and held at the previous level of 2.6%. There was hopes that inflation may rise up to 2.7% however it didn’t happen and the markets responded with Sterling losing a cent against the Australian Dollar. Whilst Sterling has dropped today, in my opinion it didn’t quite go as far as I thought it might. This is due to some of the concerns with the Australian economy which does suggests the Aussie strength is dwindling.
The number of new builds expected in the next few years in Australia looks set to fall which has an effect on the price of housing and the amount of jobs across the country. There is low inflation levels in Australia and despite the Reserve Bank of Australia suggesting they may increase interest rates to 3.5% in the next few years, they wont before inflation rises. This suggests that whilst the GBP/AUD is currently sitting around the mid 1.60’s if good news for Sterling becomes apparent the rate could rise sharply to 1.70.
In the short term there will be Unemployment Data in the early hours of Thursday morning which is expected to show July’s rate has stayed the same as June, however any deviation from this could have a positive or negative effect on rate depending on the direction. Currently with Sterling struggling and on a negative streak I do think there is more chance of the rate falling than going up.
If you do have a question with regards to my forecast or have a different question please get in touch. When you come to moving large sums of money a movement of a cent can often relate to a significant difference in your returns. Helping you formulate a strategy could make sure you’re in the best position to exchange currency when the market is in your favor, please contact me Ben Fletcher at [email protected]