Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast – ‘Aussie’ May Plummet If RBA Cuts Interest Rates

With both the RBA’s latest interest rate announcement and the UK general election taking place this week, considerable Pound Sterling to Australian Dollar (GBP/AUD) exchange rate movement can be expected over the next five days.

Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate News – UK Election Concerns, Manufacturing PMI Push Pound Lower

Over the course of last week the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate moved between highs of 1.9518 and lows of 1.9110 before closing out the week trading in the region of 1.9275.

After getting off to a pretty strong start to the week, the Pound pared gains against peers like the US Dollar (GBP/USD), Euro (GBP/EUR) and Australian Dollar (GBP/AUD) as a result of mounting speculation surrounding the outcome of the UK’s general election and below-forecast domestic Markit manufacturing data.

As stated by Bloomberg; ‘Opinion polls have shown throughout the election campaign that neither the Conservatives nor Labour will achieve a majority, meaning they’ll probably need to depend on the support of smaller parties with different political agendas. The potential for uncertainty has pushed one-week volatility on the Pound against the [US] Dollar, a measure of anticipated price swings, to 16.48 percent, the most since September’s vote on Scottish independence.’

The Australian Dollar, meanwhile, held its own against the Pound as the rising price of iron ore (Australia’s main commodity) lent the South Pacific currency some support.

That being said, bets that the Reserve Bank of Australia (RBA) will cut interest rates on Tuesday limited the GBP/AUD downtrend.

Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast – RBA Interest Rate Announcement, Outcome of UK Vote in Focus

This week the two major catalysts for Pound Sterling to Australian Dollar (GBP/AUD) exchange rate movement will be the Reserve Bank of Australia’s (RBA) interest rate decision and the outcome of the hotly-anticipated UK general election.

If the RBA cuts borrowing costs for the second time this year, which many industry experts are expecting to be the case, the Australian Dollar may soften across the board, triggering an uptrend in GBP/AUD.

Conversely, if the central bank refrains from making any adjustments to interest rates the Australian Dollar will rally.

In the opinion of economist Paul Bloxham; ‘This month appears to lack a clear trigger for a rate cut. If anything, the domestic data have surprised on the upside.’

The Australian Dollar may derive additional support if the price of iron ore continues to rise.

Meanwhile, an inconclusive UK election result would place heavy pressure on the Pound, with a hung parliament likely to lead to a sell-off of the British currency.

Over the course of the week other Australian reports to be aware of include the nation’s Building Approvals numbers, AiG Performance of Service Index, Trade Balance figures, New Home Sales and Retail Sales data, AiG Performance of Construction Index and Employment Change/Unemployment stats.

GBP/AUD exchange rate movement could also be caused by the week’s UK data; Markit Construction/Services/Composite PMIs, BRC Shop Price Index, Halifax House Prices and Trade Balance stats.

Finally, as China is Australia’s main trading partner, any reports from the Asian nation will also be affecting the performance of the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate. The most important Chinese ecostats of the next five days include the HSBC Manufacturing/Composite/Services PMIs, Trade Balance, Import & Export numbers and the nation’s Consumer and Producer Price Indexes.

On Sunday the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trading in the region of 1.9278 while the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trending in the region of 0.5184