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Pound Sterling Australian Dollar Forecast Dips on Continued 'Brexit' Upsets

June 7, 2016 - Written by John Cameron

Sterling has fared poorly against most peers of late, owing to the EU Referendum continuing unabated and potential voters rushing to register actually crashing the Government's dedicated website.

The Pound has remained low against the 'Aussie' today, despite highly supportive EU Referendum news coming out recently - this pointed towards a 'Remain' vote.

RBA Holds Rates, Australian Dollar Rallies

The Reserve Bank of Australia (RBA) announced that it would be maintaining its headline rate of interest at its current record low of 1.75% last night and the Australian Dollar (currency : AUD) posted strong gains as a result.

The RBA’s decision to slash the domestic cost of borrowing to its lowest ever level last month left the Dollar from Down Under reeling in the markets, contributing to a 20c + improvement for the GBP AUD exchange rate. Last night’s decision to ‘hold’ monetary policy as is was therefore not wholly unexpected. However, the statement from RBA Governor Glenn Stevens which accompanied the announcement struck a go-ahead tone, favouring the Australian unit.

Stevens noted that his Bank’s recent policy path is beginning to reap dividends, noting that, ‘low interest rates have been supporting domestic demand and the lower exchange rate overall is helping the traded sector. Over the past year, growth in credit to businesses has picked up, even as that to households has moderated a little.’ However, he went on to add a caveat, warning that, ‘these factors are all assisting the economy to make the necessary economic adjustments, though an appreciating exchange rate could complicate this.’

Steven’s assessment of Australia’s domestic economy was also broadly positive; the RBA supremo observed that, ‘recent data suggest overall growth is continuing, despite a very large decline in business investment. Other areas of domestic demand, as well as exports, have been expanding at a pace at or above trend. Labour market indicators have been more mixed of late, but are consistent with continued expansion of employment in the near term.’

GBP/AUD Exchange Rate Forecast to Extend Losses on 'Brexit' Uncertainty

The Pound Sterling Australian Dollar exchange rate had traded up to close to the 1.9750 GBP AUD threshold in the run up to the RBA’s announcement, but the pair plunged in the hours which followed, touching an intraday low of 1.9494 earlier.

Analysts forecast further losses for the pair if opinion polls continue to suggest that UK voters might opt for a potentially damaging ‘Brexit’ on 23rd June.
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