Last week yearly Australian inflation fell to 1.3%, when many market forecasters were predicting 1.8%. Lower global oil prices at the back end of 2018 is being labelled as the main contributor. Now that inflation has fallen, bookmakers are predicting that there is a 50% chance that the Reserve Bank of Australia will now cut interest rates next week. Last time yearly inflation dropped this low was in 2016 and former Governor Glenn Stevens cut interest rates. The question is, will Philip Lowe follow suit?
Over the years, when a central bank cuts interest rates we tend to see the currency devalue. Furthermore this can actually happen before the event as speculators begin to second guess the decision. For clients that are selling Australian dollars to buy a foreign currency short term, there is a strong argument to buy your currency sooner rather than later.
Australian dollar to sterling predictions
Even though the Australian dollar could face pressure in the upcoming weeks due to monetary policy decisions, sterling has problems of it’s own. The pound has lost momentum over the last 4 weeks once Theresa May accepted a 6 month extension to the Brexit process. At present the PM and the leader of the opposition continue to negotiate in London and the customs union debate is at the centre of the negotiations. Labour leaders Jeremy Corbyn wants to remain part of a customs union, where as for Theresa May this a red line she is not prepared to back down on.
Personally I believe the PM is running out of time. If she doesn’t want to take part in European elections a decision will have to be made very soon. Therefore I expect her to announce that the negotiations have failed and therefore are over and consequently will give MPs another vote in the commons to try and reach a majority. All in all, it doesn’t look good news for clients holding onto sterling.
If you are buying or selling Australian dollars in the future, I would strongly recommend getting in contact to discuss your situation. The company I work offers a proactive service to offering economic information whilst having the ability to offer award winning exchange rates. Feel free to email me with the currency pair you are converting, your requirements along with the timescales you are working to and I will respond with my forecast and the process of using our company [email protected].