How the RBA rate decisions are likely to affect the AUD/GBP rate

AUD GBP Looks to Data to Continue Recovery

The Reserve Bank of Australia (RBA) has been in talks in the last 24 hours to discuss the future of its rate cutting. Analysts are predicting that the RBA will refrain from any further cuts at least till the end of 2019. This may be a positive move as analysts suggest the market isn’t ready for another cut whilst others suggest that the RBA may have its hand forced into cutting rates later in the year or at the start of 2020.

Cause of previous rate cuts

The RBA has previously cut rates three times this year. This was to lift growth and inflation. Many experts predict that it will not be long before the RBA cuts the cash rate once more to a new record low of around 0.5%. The bank will most likely look toward achieving ‘full employment’ which should see rising wage packets, eventually leading to higher inflation. This puts an emphasis on the monthly job numbers in the coming months ahead.

The RBA’s outlook on rate cutting

The predicted outcome for the RBA is that it will likely be forced to cut its cash rate once more in the first half of 2020. In doing so, the Australian dollar will likely hit new lows, going toe-to-toe with the US dollar over the next six months. However, analysts have stated that another cut so soon could spell detriment to the AUD as the financial markets are not prepared for one so soon. Another cut so soon could negatively affect the AUD/GBP pairing, so this may be one of the reasons behind the RBA holding back on performing another cut right now.

Current state of AUD trading following the RBA meetings

On Tuesday, reports suggested that the AUD/USD and AUD/JPY interbank exchange rates were both down from their session highs, meaning the AUD is on the backfoot with these RBA meetings inbound. Analysts have also suggested that the AUD is looking likely to be volatile and show signs of exhaustion at higher levels as the US and China continue their back and forth about their trade deals.

On the other hand, should the US-China deal go well is likely that the AUD will continue to rise and fare well against sterling. Potential buying GBP with AUD may seek the news of the US-China trades before making any significant purchases as this may create opportunities should the deal come off positively.

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