In the early hours of tomorrow morning Philip Lowe who is the Governor of the Bank of Australia will speak providing his latest thoughts on the Australian economy. The RBA recently announced they plan to increase interest rates upto 3.5% over the next few years, which would be a 2% increase.
The speech will provide the thoughts of the Governor and could provide an indication as to when the first hike may be. Inflation is low in Australia and its unlikely until that starts to rise there will be little movement. In my opinion should there be a interest rate hike in the near future in Australia the GBP/EUR rate could start to move towards the 1.60 level if not lower. Sterling is massively struggling with little sign of strength and a Aussie hike would only add further momentum.
There should also be a focus on what the US do over the next few months as a period of uncertainty does not appear to be far away. The US interest rate hikes had started to help the GBP/AUD rate to rise as investors moved funds from Australia to a more secure US Dollar. However if the US for example were to go to war with North Korea, the currency may start to be weaker as investors look for certainty. Australia is one of the only high interest rate economies in the leading markets and could receive even more investment. In short I can see a lot more chance of 1.60 than 1.70 on the GBP/AUD.
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