The pound to Australian dollar exchange rate has pushed slightly higher breaking over 1.80 again for the GBP to AUD pair. The National Australia Bank’s business survey yesterday disappointed the markets and has placed some pressure on the Australian dollar. However the Westpac consumer confidence numbers for July released overnight took a major fall into negative territory at -4.1%. The particularly low numbers signal a bumpy ride ahead with consumer confidence running low.
The weak numbers follow two consecutive interest rate cuts from the Reserve Bank of Australia although these cuts may take some time before any improvement in the economy is seen. The AUD to GBP pairing is likely to now be heavily influenced by any developments with the ongoing US China trade war and also the outcome from the next US Federal Reserve meeting later this month. The US Fed are widely tipped to cut interest rates at the July meeting and there are some expectations that there could even be a 50 basis point rate cut.
The Australian dollar as commodity currency will likely be impacted by any such move although the markets would appear to have started adjusting and pricing in prior to the event. In Australia, rates now sit at just 1%, the lowest on record and substantially lower than the average base rate which has been 4.39% since 1990. With rates so low the Australian dollar is currently disregarded as a high yielding currency and so there could be further weakness for the Aussie.
Brexit meanwhile continues to be the single biggest driver for sterling exchange rates and the GBP vs AUD pair. As the two Conservative runners battle it out for the top job the pound is likely to see a very volatile few months ahead. The new Prime Minister is expected to be announced 23rd July and the course of action he takes on Brexit will likely dictate the direction of travel for the pound vs Australian dollar. Any further rhetoric of a no deal Brexit is only likely to help see the pound weaken further. The fact that the favourite Boris Johnson has made so clear that Britain must leave the EU by 31st October with or without a deal is likely to be the main talking point for these coming months ahead of the deadline.
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