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Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as ‘Aussie’ Traders Fear RBA Interest Rate Cut

Australian Dollar Currency Forecast

GBP/AUD Exchange Rate Edges Higher as Australian CPI Figures Fall in First Quarter

The Pound Australian Dollar (GBP/AUD) exchange rate rose by 0.8% today and is currently trading around AU$1.8377 on the inter-bank market.

The Australian Dollar (AUD) weakened against the Pound (GBP) following the publication of the Australian Consumer Price Index (CPI) figures for the first quarter, which fell to 0.0% against the expected rise of 0.2%.

These were followed by the Reserve Bank of Australia’s (RBA) trimmed mean CPI figures for the first quarter, which eased at 0.3%.

This has heightened concern that the RBA will cut interest rates, which has considerably weakened the ‘Aussie’.

Ben Udy, an Economist at Capital Economics, said:

‘Our expectation has been that the Bank would wait for further weakness in economic activity and the labour market before cutting rates in August, but the outlook now is eerily similar to early-2016 when the Bank cut rates on the back of weak inflation data despite steady improvements in the labour market.’

The Pound strengthened against the ‘Aussie’ despite indications that cross-party talks on Brexit are breaking down.

The Labour leader Jeremy Corbyn has recently said that Prime Minister Theresa May is failing to draw concessions on crucial aspects of her withdrawal deal.

GBP/AUD Exchange Rate Rises as Public Sector Borrowing Falls to 17-Year Low

Today saw the publication of the UK’s public sector net borrowing figures for March, which fell to a 17-year low, providing uplift for the GBP/AUD exchange rate.

Samuel Tombs, the Chief UK economist at Pantheon Macroeconomics, commented:

‘The jump in borrowing entirely reflects a £1.8bn increase in central government net investment, which is volatile and will boost the economy.’

There are, however, signs of increasing factions within the Conservative party as Theresa May is increasingly coming under pressure to resign from a number of MPs.

Another instance that indicates this division is with the return of the former Conservative MP Ann Widdecombe to the politics, in which she has decided to stand behind the newly formed Brexit party in the upcoming elections.

Sterling traders are remaining somewhat cautious as Brexit developments appear to have stalled, with little in the way of developments having happened since – or during – the Easter break.

GBP/AUD Outlook: Sterling Could Sink on Heightened Brexit Uncertainty

Tomorrow is Anzac Day which will see Australian banks closed for the national holiday.

Many ‘Aussie’ traders will be focusing on geopolitical developments instead, and with the news that the US will head back over to China next week to continue trade talks, this may offer some support for the risk-sensitive Australian Dollar.

Pound traders, meanwhile, will be focusing on Brexit developments.

Any signs that the two major parties, Labour and the Conservatives, are growing increasingly further apart in cross-party talks could see the GBP/AUD exchange rate weaken on increased Brexit uncertainty.