The GBP/AUD exchange rate could be in a different position come tomorrow morning as the markets await the latest decision from the US Federal Reserve.
Whilst there isn’t expected to be a change in interest rates today, there could be an indication to a future hike. At the start of this year the FED expected to raise rates 3 times and so far we have only seen two. Some of the data over the past few months has been dubious for the US with inflation appearing to be falling stagnant.
Trump had set out to ramp up inflation with his economic policy however it doesn’t appear to be necessarily working and tomorrow could set the turn for the US Dollar.
The reason for Aussie concern is the currency has been used by investors because of its higher interest rate. With the base rate in Australia at 1.5% investors will invest for a higher return than what they could get elsewhere. However if the US were to raise interest rates then they will match the 1.5% seen in Australia.
This is key because the US is considered a much safer currency with less influencers and volatility. Whilst the US Dollar hasn’t been showing the security it normally does of late, there is still less risk than involved in the Australian Dollar.
Even in the last week Ian Harper a member of the Reserve Bank of Australia board has suggested that they are not in control of their currency and external factors are dictating most of what happens. This isn’t set to change anytime soon, however rather than strengthening the AUD may start to give up much of their recent gains, especially if the US and other central banks start to raise interest rates.