Pound vs Australian Dollar Forecast and the impact of inflation and an election

The fall in COVID cases throughout Oz has led to AUDGBP, AUDUSD and AUDEUR rate increasing throughout yesterday’s trading.

The Australian Dollar has been performing a little better as of late vs the Pound however things could be different over the next few days when Australia releases its latest inflation data.

Expectations are for a fall from 1.8% to 1.5% and if this happens I think we could see some Australian Dollar weakness ahead.

The reason is that if inflation falls this could put pressure on the Reserve Bank of Australia to consider cutting interest rates in the near future.

The Australian economy has been under pressure during the last few months for a number of reasons with one big factor that of the housing market.

Property prices across the country have fallen and a central bank will often look at cutting interest rates in order to give the sector a boost.

The impact of an interest rate cut usually results in weakness for the currency involved and that is why I think the Pound could increase on Wednesday when the RBA announces the latest inflation data.

However, although I think the Australian Dollar could weaken I do think that the RBA will keep rates the same over the next few weeks as we are just over a month away from the next elections in Australia and a central bank will often keep monetary policy the same as changing it can result in a lot of uncertainty for markets especially when an election takes place.

The Labour party down under is gaining more votes and this is not popular for big business as the result would likely to be increased taxation and this could be another reason why the Australian Dollar could suffer if the party wins next month.

If you would like to save money on exchange rates when buying or selling Australian Dollars and would like a free quote then contact me directly and I look forward to hearing from you.

Tom Holian teh@currencies.co.uk