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GBP/AUD Exchange Rate Falls Despite Expectations for RBA Rate Cut

Last week’s high: AU$1.8437

Last week’s low: AU$1.8165

‘Aussie’ Rises despite Dovish Comments From RBA Governor Lowe

The ‘Aussie’ slipped against the Pound on Tuesday as the Reserve Bank of Australia (RBA) Governor, Philip Lowe gave his clearest indication yet that the central bank will slash interest rates in October.

While he said previous cuts were implemented in order to lower unemployment, buoy wage growth and push inflation back up to target, the effect of these cuts appears to be negligible, with the economic situation continuing to deteriorate.

Risk sentiment fluctuated over the course of the week following calls for US President Donald Trump to be impeached. The controversy arose when the American premier pressured Ukrainian President Volodymyr Zelensky to investigate Trump’s leading political rival, Joe Biden.

The risk-sensitive Australian Dollar benefitted when President Trump announced a US-China trade deal could happen sooner than expected and Chinese diplomats showed solidarity, announcing that Beijing was willing to buy more US products as a gesture of goodwill.

Meanwhile, the Pound remained under pressure following a UK Supreme Court ruling that Boris Johnson’s five-week suspension of parliament was unlawful. While this created a temporary surge of support for GBP, the British currency slumped at the end of the week on a mounting sense of political uncertainty.

AUD Outlook: Will a Dovish RBA Leave AUD Under Pressure?

Looking ahead, the Australian Dollar is likely to slide as the Reserve Bank of Australia (RBA) is expected to slash rates to 0.75% on Tuesday. AUD could suffer further losses following a speech from RBA Governor Philip Lowe in which he seems likely to highlight weaknesses in the Australian economy.

However, the ‘Aussie’ could enjoy an upswing of support at the end of the week if Australian new home sales rebound from the previous month’s slump, though this could be offset if seasonally adjusted retail sales prove disappointing.

Meanwhile, the Pound Australian Dollar exchange rate could edge higher on sliding risk appetite if the US-China trade relationship shows any sign of deterioration.

Key Events

30th September

09:30   GBP GDP (Q2)

23:30   AUD Performance of Mfg Index (Sep)

1st October

05:30   AUD RBA Rate Statement

05:30   AUD RBA Interest Rate Decision

09:30   GBP Markit Manufacturing PMI (Sep)

3rd October

02:30   AUD Trade Balance (Aug)

09:30   GBP Markit Services PMI (Sep)

4th October

02:30   AUD Retail Sales (Aug)

n/a       AUD HIA New Home Sales (Aug)

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