The Australian dollar forecast continued its rally against the pound yesterday, following the Reserve Bank of Australia’s (RBA) decision to keep interest rates on hold at their record low of 0.25%. Yesterday’s exchange rate movement follows the consistent trend we have seen in recent months, with AUDGBP exchange rates moving by over 10% since the beginning of April. In monetary terms, a transfer of A$200,000 to Sterling today compared to the beginning of April could achieve in excess of an extra £10,000. If you have an upcoming AUDGBP currency transfer to make, get in touch with us to find out how you can take advantage of this rate movement in your favour.
Bullish Tone From the RBA Helps AUD Make Gains
In the early hours of yesterday morning, as was widely anticipated by the markets, the RBA announced that they would be keeping interest rates on hold and that the “accommodative approach will be maintained as long as it is required.” The tone from Governor Phillip Lowe in his press conference was far more bullish than has been seen previously, stating, “it is possible that the depth of the downturn will be less than earlier expected. There has also been a pick-up in some forms of consumer spending.” Lowe’s statements come at a time where lockdown restrictions have been widely lifted across the nation since the success of containing the spread of the virus. AUD rates have benefitted from this and could continue to do so if economic output improves.
Tensions between Australia and China have also been ramped up in recent weeks, which has led to fears over Australian exports to their largest trade partner and the impact this could have on the economy. Yesterday however, a high trade surplus was announced in current account surplus figures, due to higher prices for Australian exports and a significant drop in import numbers.
UK-EU Brexit Talks Compromise Could Strengthen Sterling
Whilst the AUD has made significant gains against sterling, GBP exchange rates have improved against other currencies this week as fears over a no-deal Brexit, which were extremely high last week, have started to ease slightly. Brexit talks have hit a stalemate in recent weeks, with EU and UK negotiators refusing to back down on either side over certain issues which has led to concerns that the UK government would shift plans towards planning for a no-deal Brexit come the end of this month.
However, the tone from the UK side specifically has changed this morning, and there are reports that UK negotiators are willing to relax their stance on fisheries, so long as the EU are willing to compromise on their side. Talks are due to resume this month and are likely to have a significant impact on GBP exchange rates depending on the outcome. As we have seen historically, whenever a No-deal looks more likely, the Pound suffers, whereas we have seen gains when a deal starts to look as though it could be struck. Any clients with a GBPAUD currency transfer should keep a close eye on this topic over the coming weeks and speak with their account manager here to have a plan in place to minimise risk to adverse currency movements.
AUDUSD Rates Gain on US Volatility and Uncertainty
AUDUSD exchange rates have also strengthened substantially so far this week, with AUD gains over more than 4% over the past 7 days. The protests that are ongoing across the nation following the death of George Floyd are likely to continue to economic uncertain and social unrest, which will weigh on USD exchange rates. Donald Trump stated yesterday that he will bring the military in to help protect the nation and control the protests which is likely to add to market uncertainty. Tensions between the US and China also continue to rumble on and whilst the do, it is likely that this will continue to hamper USD strength.
Data this week that could affect AID exchange rates includes import and export figures tomorrow, along with retail sales figures. As mentioned earlier, a positive current account balance for Australia was released yesterday due to strong export prices, so it will be interesting to see if this is mirrored in the trade balance figures. If that is the case then we could see further AUD strength. US nonfarm payrolls and jobs numbers are also likely to have a significant impact on AUDUSD exchange rates.
To discuss this in further detail to find out more about how these factors could directly impact your currency exchange, get in touch using the form below. I’ll be happy to contact you personally and discuss your enquiry.