Will the US Fed cut interest rates? and how will this affect the AUD exchange rate
The pound to Australian dollar exchange rate has rallied higher with levels breaking over 1.82 for the GBP vs AUD pair. Today sees the US Fed interest rate decision where an interest rate cut of 0.25% is widely expected taking rates down to 2% from 2.25%. This is relevant for the Australian dollar as the differential between interest rates in both Australia and the US can have a direct impact on the exchange rate.
How will proroguing of UK Parliament effect the GBP to AUD exchange rate?
Meanwhile in Britain the English courts will continue a second day to hear whether the decision to prorogue parliament is lawful. It follows after the High Court in England decided it was lawful but the Scottish courts felt it was unlawful. There is huge media interest in the exceptional case which is testing the unwritten constitution of the United Kingdom. Any outcome is likely to see market volatility for GBP to AUD exchange rates as the outcome will likely decide the future path of Brexit ahead of the 31st October deadline when Britain will formally leave the EU. Whilst the Prime Minister has signalled he will abide by the courts decision the future decisions of the Prime Minister in that scenario are not clear.
As tensions surrounding Brexit reach boiling point it has been reported that discussions are taking place on a technical level behind the scenes although the British government has so far not put anything to the EU formally in writing. It leaves an uncertain period ahead and any breakthrough or movement closer to a deal or no deal is likely to see a big market reaction for the GBP AUD pair. Those with pending requirements either buying or selling Australian dollars would be wise to consider their options and plan around all the latest Brexit developments.
CPI inflation data expected to be released today
UK Consumer Price Index (CPI) inflation data is released this morning which are expected to show a small pick up in the numbers. The numbers are likely to be more relevant for the longer term outlook though with the single biggest issue of Brexit as well as the prospect of a general election just around the corner. The Bank of England is unlikely to make any move in interest rates until these two points are progressed.
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