Over the last couple of months both sterling and the Australian dollar have devalued in value due to their own specific problems. In the UK the ongoing Brexit saga is a major concern and the chances of crashing out of the EU have increased dramatically. Down under interest rates have been cut due to falling inflation and an underperforming property market. For clients that are converting sterling and Australian dollars, it doesn’t look like the UK or Australia’s fortune is going to change anytime soon, therefore the question clients should now ask themselves is which currency will devalue more than the other in the months to come?
Today MPs within the Conservative party will vote on who they want to see as the next Prime Minister. By the end of the day if a candidate has failed to achieve 17 votes they will be eliminated from the race to become the next PM. At the moment Boris Johnson is the front runner and the bookies favourite, which increases the chances of crashing out of the EU, even though he has made it clear this is not his aim. Yesterday there was an important vote in Parliament and the cross party attempt to give the commons power to stop a future PM from taking the UK out of the EU without a deal was defeated. This essentially means come the end of October if the UK fail to reach an agreement with the EU, the UK will crash out by default.
Down under it looks like interest rates could be cut further throughout the year. Most forecasters are suggesting this could be by 0.5% by the end of the year. When the cuts materialise, short term this could cause a problem for the Australian dollar, but long term it may stimulate growth. When trying to second guess sterling to Australian dollar exchange rates, my personal view is that Brexit will have the final say on the future direction. If the UK manage to persuade the EU to make changes, I expect GBPAUD to increase towards 2, however if the UK crash out of the EU I expect GBPAUD to fall to the lower rates we have seen over the last couple of years which is 1.60.
If you are buying or selling Australian dollars with sterling, I expect major fluctuations in the next months, therefore making a decision now seems wise. It’s a gamble either way! If you would like help achieving exchange rates, that you are unlikely to receive with your own high street bank feel free to email me directly and I will personally respond with the process [email protected].