In the early hours of Tuesday morning the Reserve Bank of Australia (RBA) released the minutes from their latest Monetary Policy meeting. The minutes showed the members of the committee have considered how they will normalise rates in Australia. Furthermore, they suggested that the interest rate in Australia will return to 3.5% which is 2% above the current 1.5% level over the next few years.
Talk of multiple Australian interest rate hikes in the next few years helped boost the Australian Dollar, resulting in the GBP/AUD rate hitting it’s lowest point in several months.
The rate hikes are not thought to be imminent, however, as they’re now talks known to be taking place the GBP/AUD range will change. Previously there was hope that the rate may once again get back to 1.75 but there is now little hope of that happening. Now the rate is likely to sit in the 1.60’s, the maximum level I believe it could reach to now is the 1.70 mark.
Unemployment Data Thursday
After good news from the RBA we could see further data that could add more pressure to the GBP/AUD rate. If the Unemployment data for June comes out better than expected then there is a real chance of the rate moving closer to the 1.65. If you’re looking to transfer Australian Dollars back to Sterling, or most other major currencies now might be the best time.
Sterling is unlikely to gain much momentum unless there is news about Brexit or an interest rate hike – which seems unlikely as the chance of a UK rate hike have slipped away recently. This suggests that buying Australian Dollars could become more expensive.
Over the next few months there is going to be more pressure which should encourage plans to be brought forward. The moment there is a date for a interest rate hike, or an off-the-cuff raise there will be a major downward movement for the GBP/AUD rate and today’s movement could just be the start.