The Pound has risen marginally against the Australian Dollar on Friday’s trading session, advancing to a rate of 1.7093.
This appreciation follows a hawkish statement from Patrick Harker, a policymaker at the Federal Reserve. Harker has backed higher interest rates in December, which has caused slight US Dollar appreciation.
In turn, this has weakened the Australian Dollar because an actual US interest rate hike could greatly strengthen the US Dollar.
(First published September 29th, 2017)
The Pound has lost ground against the Australian Dollar recently, but could recover after a key Brexit event in October.
Pound could Advance if October Brexit Review is Positive
Looking ahead, the Pound could struggle against the Australian Dollar when EU officials conduct a review of Brexit in October.
The meeting between EU leaders will be to see how far Brexit discussions have progressed so far and whether this is sufficient to move discussions on.
Crucially for the UK, it is hoped that EU leaders will be approving as this could allow UK negotiators to start working on a UK-EU trade deal.
In recent weeks, issues such as the Irish border, EU citizens’ rights and an ‘exit bill’ payment have all been sticking points.
Should these get resolved before the October review, there is a chance that the Pound could rise if the meeting puts a trade deal on the table.
Australian Dollar may rise on RBA and Government Cooperation
Following on from a speech by Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle, the Australian Dollar could be on track to appreciate against the Pound.
This will largely come from signs of increased unity between the RBA and the Australian government, given the nature of Debelle’s remarks.
The policymaker stated that there was increasing criticism about the bank’s activities, saying;
‘My view is that inflation targeting and central bank independence are being blamed for economic outcomes that are not a consequence of either of them, but rather of our understanding of the way the economy operates’.
Musing on possible RBA policy in the future, Debelle queried;
‘Does the goal of financial stability need to be better defined than it is at the moment? If so, by whom?
Should the central bank have complete independence to pursue its goal of financial stability with whatever instruments it so chooses, including when the distributional implications of some of those instruments are much starker? The questions do not have a straightforward answer’.
If it looks like the RBA is getting more respect and authority from previously sceptical government bodies, the Australian Dollar could advance.
This is because there would be greater free rein to act in Australia’s interests, potentially resulting in tighter monetary policy despite the negative side effects.
Recent Interbank GBP AUD Exchange Rates
At the time of writing, the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.7036 and the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.5863.
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