Pound to Australian Dollar Hits 3-Week High as RBA Forecast to Cut

AUD GBP Struggles at the 0.5350 Price Level

The pound to Australian dollar interbank exchange rate stands at 1.9153 today at the time of writing. This is its highest in three weeks, or since December 18th.

By comparison, back on December 23rd, sterling was as low as 1.8669 versus the so-called Aussie dollar. So it’s since strengthened by 2.59%, or by almost five cents.

A partial explanation why the GBP to AUD interbank exchange rate has reached this three-week high today is because the Reserve Bank of Australia (RBA) is being increasingly tipped to cut interest rates, below their current 0.75%.

This is because bush fires continue to sweep Australia, destroying millions of acres and thousands of homes. So to try and support Australia’s economy during this natural disaster, the RBA may cut borrowing costs, to reduce the cost of a loan for Australian businesses and households.

The RBA makes its next interest rate decision on February 4th 2020, and an interest rate cut would traditionally weaken the Australian dollar.

Johnson and Von Der Leyen to Begin UK/EU Trade Talks

Turning to today, sterling might be affected, because UK Prime Minister (PM) Boris Johnson will meet new European Commission (EC) President Ursula Von Der Leyen in Downing Street, to begin the UK/EU future trade talks.

It’s thought that the two leaders’ conversation today will set the pace and tone of the negotiations to come over the next few months.

PM Johnson has set a deadline of the end of this year to finalise the trade talks, while President Der Leyen thinks that they may have to be extended, especially as such trade talks normally take years to finalise.

In particular, if the discussions today goes smoothly, or otherwise, this could affect the value of sterling.

Australia’s Building Permits Rise, Trade Balance Due, Could Influence AUD

Turning to the economic calendar, yesterday we learnt that Australia’s building permits surprisingly rose by 11.2% in November, well above forecasts for 2%, which could impact the Australian dollar’s value.

Tomorrow, we’ll learn Australia’s trade balance statistics for November, forecast at AU$5,915 million, while on Friday, Australia’s retail sales data for November goes public too, predicted at 0.4%. These releases could be worth watching, for their effect on the GBP to AUD interbank exchange rate.

If you are in the process of buying or selling Australian dollars and would like a free quote then contact me directly, Tom Holian, I look forward to hearing from you.[email protected]