The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate firmed on Monday as the ‘Aussie’ came under pressure ahead of Wednesday’s US Federal Reserve policy meeting and as economists forecast that the currency will weaken over the coming months.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate touched a session high of 1.9376
Sterling received support overnight after a report released by property firm Rightmove showed that the average price of a house in the UK is now just £30 under the record high level seen last summer. Prices are expected to breach the all-time high level later in the year as Britons approaching retirement age use their pensions to snap up buy to let properties. The average asking price across England and Wales is now £281,752, a 1% increase from the preceding month.
The Australian Dollar came under pressure after economists said that the Reserve Bank of Australia governor Glenn Stevens would have to take more action to take more action to stop the nation’s economic slide. They also predict that the ‘Aussie’s’ decline will be sharper than initially expected.
More Australian Dollar Declines Forecast
‘We anticipate further rate cuts; we’re seeing significant declines in the prices of Australia’s commodity exports. If we put all those things together, we could well see the Aussie Dollar down towards the US70 cents in the second half of this year,’ said Stephen Miller, the Sydney based head of Australian fixed income at BlackRock.
Last week, RBA assistant governor Christopher Kent said that even with the recent declines in the ‘Aussie’s’ value it was still at relatively high levels given the state of the economy.
Also weighing upon the currency are falling iron ore prices. Westpac Bank said that it does not expect iron ore prices to begin to recover until next year.
‘There has been what economists call a shift. The boom in China is slowing, demand for iron ore is still well down, but the economy there is still growing by 7%. We are not talking in a negative way about China, but the demand is definitely lower with this big supply of cheap ore coming online, from South America and Australia,’ said Justin Smirk, senior economist at Westpac.
As the week progresses we can expect to see the ‘Aussie’ come under more pressure as market attention turns to Wednesday’s US Federal Reserve policy meeting. Any hint that policy makers are edging closer to hiking rates then emerging market and commodity-based currencies will decline.
