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Dovish RBA Minutes Send the Pound Australian Dollar (GBP/AUD) Exchange Rate Higher

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Edges Higher on Dovish RBA

The Pound Sterling Australian Dollar (GBP/AUD) exchange rate edged higher this morning, leaving the pairing trading at around AU$1.9460.

The Australian Dollar suffered losses this morning following the release of the Reserve Bank of Australia’s (RBA) meeting minutes.

The first monetary policy meeting of 2020 showed the bank’s policymakers discussed easing monetary policy.

While the bank left rates unchanged at an all-time low of 0.75%, talk of easing left the ‘Aussie’ under pressure.

Covid-19 fears also weighed on the currency, and due to the recent escalation and spread of the virus, the minutes do not currently reflect the current situation.

Commenting on this minutes, RBC Capital Markets’ head of fixed income strategy, Su-Lin Ong noted:

‘The minutes are two-week old with further escalation in the virus and impact including greater disruption to supply chains, delayed term starts for Chinese students, and an extension of the ban on arrivals from mainland China.

‘This suggests that there is some risk that our base case for a June rate cut slips in to H2, with a more drawn-out path to terminal cash of 0.25%.’

The number of Covid-19 cases fell in the Hubei province, from 1,933 to 1,807. However, experts have warned it is too early to tell if the outbreak is being contained, leaving AUD under pressure.

Pound (GBP) Rises as UK Employment Rate Hits Record High

Sterling edged higher after UK labour market statistics revealed the UK unemployment rate remained at the lowest level seen since 1975.

Added to this, the UK’s employment rate hit a record high of 76.5% in the final quarter of 2019.

However, the data also showed that average earnings fell to an annual growth rate of 3.2%, down from 3.4%.

Although, once you adjust wages for inflation pay in the UK has hit its pre-crisis levels, boosting Sterling.

The unemployment report from the Office for National Statistics (ONS) said:

‘Real regular pay increased by 1.8% to £474 between December 2018 and December 2019.

‘This was the first time that real regular pay exceeded the pre-turndown peak of £473 recorded in March 2008. However, the annual rate of growth of both total and regular pay slowed down in recent months.’

Pound Australian Dollar Outlook: UK Inflation in Focus

Looking ahead, the Australian Dollar (AUD) could slide against the Pound (GBP) following the release of Westpac’s Leading Index.

If January’s index slumps further than expected, ‘Aussie’ sentiment will slide.

Meanwhile, January’s UK inflation data could provide Sterling with a boost.

If inflation rises, moving closer to the Bank of England’s (BoE) target, the Pound Australian Dollar (GBP/AUD) exchange rate will edge higher.