As with many currencies the Australian Dollar has posted some strong gains against the pound in recent weeks having moved from yearly lows of 1.8520/0.5399 at the end March to last weeks high of 1.7920/0.5580, a change of 3.35% in this time. But will this trend last?
With many major central banks looking at raising interest rates throughout the remainder of 2018, including the UK and US, will the potential lack of action from the Reserve Bank of Australia keep the Aussies moves in check?
Most analysts would expect the Bank of England to raise at least once before the end of 2018, indeed early last month many were banking on a move at their next meeting in May but lower inflation and poor UK growth figures may have put pay to this. However it is the stubbornly high inflation levels in Australia that is likely to the keep the Reserve Bank of Australia (RBA) from raising until 2019 at the earliest.
The Australian economy is by no means performing poorly, but it is performing patchily and with inflation high and having more spare capacity in its labour market when compared with other major economies, this lack of movement in monetary policy is likely, in my view, to keep any further gains for the Australian Dollar in check.