Australian Dollar Could Be Forced into QE Next Year, Whilst GDP Data Causes Sharp Drop for AUD

AUD GBP Higher Ahead of Inflation, BoE Governor

Reaching the latter end of the week, AUD is still facing may issues. Weak Q3 GDP data has weighed heavy on the currency. Whilst economists are calling for the RBA to make further interest rate cuts in order to relieve the Aussie economy. Meanwhile, GBP/AUD exchange rates look for new highs ahead of next weeks general election.

Disappointing Q3 GDP Data Weighs on AUD

AUD crashed following the release of the third-quarter GDP on Monday, the figures disappointed an already beaten market. This lead investors to bet on further interest rate cuts again from the Reserve Bank of Australia (RBA). The dovish news for Australia has been music to the GBP’s ears as it hones in on a new post-referendum high on the GBP/AUD exchange rate.

GBP/AUD Looks for New Post-Referendum High

For GBP, now seems to be the time to take advantage of the struggling Aussie economy, with AUD standing lower against all of its major rivals just yesterday morning. The highest recorded losses were against the election-transfixed GBP. The Pound rose higher than all of its rivals yesterday as it comes into close touching distance of a new post-referendum high. The key factor for GBP will of course be the decision of the General Election on the 12th December. For the currency markets, a Conservative majority is what they will be hoping for. A Tory majority would negate a threat of a ‘no deal’ Brexit as well as allowing the economy to progress from negotiation stage which has left the Bank of England fixed. Some are worrying that the opposition Labour party are rallying support which may see a surprise Labour rise on the day.

How the Weak Aussie GDP Data Will Affect the Outlook of AUD

With the news of the weak GDP data, AUD is set to suffer. Markets are particularly concerned with the performance of GDP data as it reflects the rising and falling economic demand which is crucial in regulating the inflation that the RBA has been coveting with its previous three interest rate cuts in 2019. Slower growth and weaker domestic demand should lead to lower inflation down the line, which is being used in support of urging the RBA to do more to meet its 2-3% inflation target. Experts are suggesting that the RBA will be forced into cutting the cash rate twice more in 2020, which would see the rate drop from 0.75% to around 0.25%.

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