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Risk of Further RBA Rate Cuts Leaves Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Flat

September 11, 2019 - Written by John Cameron

Pound Australian Dollar (GBP/AUD) Exchange Rate Muted as NAB Warns of Further RBA Rate Cuts

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate remained muted and the pairing is currently trading at around AU$1.7998.

The ‘Aussie’ was left under pressure as National Australia Bank (NAB) warned the country’s central bank may be forced to cut interest rates further.

NAB warned the Reserve Bank of Australia (RBA) may have to bring rates down to 0.25% and start untraditional methods to boost the economy.

The bank also added that there was a growing risk to the domestic economy as Westpac’s consumer sentiment survey revealed over half of Aussie taxpayers are unlikely to spend all of their recent tax refund.

Added to this, Westpac revealed shopper confidence slumped despite the extra cash consumers had, with pessimists now outnumbering optimists.

Commenting on the data, Westpac chief economist Bill Evans stated:

‘Month to month timing of RBA moves is imprecise but with the case for lower rates quite clear and both US Federal Reserve and European Central Bank likely to be easing policy in the next week or so the next meeting in October seems a sensible time for the Reserve Bank to deliver the next rate cut.

‘Westpac expects a second cut in February 2020, which we believe will follow further cuts from the Federal Reserve by year’s end.’

Sterling (GBP) Flat as Parliament Enters Five Week Suspension

Sterling steadied on Wednesday as investors priced in the chances Prime Minister Boris Johnson would be able to reach a Brexit deal with the European Union.

The Prime Minister said he would not request a Brexit delay beyond the 31 October deadline.

This came just hours after the Brexit delay bill became law which forces the government to delay until January 2020 unless he can reach an agreement.

Meanwhile, Sterling remained subdued as parliament entered its five-week prorogation and ING analysts noted:

‘With the UK Parliament suspended for the next five weeks, GBP may enjoy some more calm today/this week, but we expect pressure on Sterling to return once the early elections are announced.’

Australian Dollar (AUD) Left Flat despite Signs US-China Tensions Beginning to Thaw

Meanwhile, an announcement from China’s Ministry of Finance provided further evidence US-China trade tensions were beginning to thaw.

Beijing has stated 16 types of US products will be exempt from further tariffs, including whey and fish meal along with some lubricants.

Despite this providing an upswing in risk sentiment among traders, upcoming major central bank meetings left investors cautious.

Investors believe the European Central Bank (ECB) will slash rates, bringing them into negative territory, setting the tone for the US Federal Reserve and the Bank of Japan (BoJ) meetings next week.

Pound Australian Dollar Outlook: Could an Increase in Risk-Appetite Buoy AUD?

Looking ahead to Thursday, the Australian Dollar (AUD) could edge up against the Pound (GBP) following September’s consumer inflation expectations.

If expectations are higher than expected, the Australian Dollar could rise.

Meanwhile, the ‘Aussie’ could gain if there are further reports tensions between the US and China could be cooling.

If there are signs tensions are thawing and risk appetite increases, the Pound Australian Dollar (GBP/AUD) exchange rate is likely to slide.

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