GBP/AUD Exchange Rate Rockets Following RBA Rate Decision
The Pound Australian Dollar (GBP/AUD) exchange rate soared close to a one-week high overnight on Monday as markets reacted to the Reserve Bank of Australia’s (RBA) latest rate decision.
At the time of writing the GBP/AUD exchange rate is currently trading at around AU$1.8355, up around 0.8% or over a cent from this morning’s opening rate.
Australian Dollar (AUD) Plummets as RBA Hints Rates May Have Further to fall
The Australian Dollar (AUD) is currently in the doldrums after the RBA voted to cut interest rates to a new record low.
As was widely expected, RBA policymakers voted to lower rates by 25 basis points to 0.75% following its October policy meeting.
The cut follows a stream of poor Australian economic data in recent months, particularly in regards to unemployment, which remains stubbornly high despite the RBA’s recent easing measures.
Policymakers also cited concerns about the risks posed by slowing global growth when giving its reasoning for the latest cut.
Perhaps most important however is that the RBA left the doors open for further rate cuts down the road.
RBA governor Philip Lowe said:
‘The Board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.’
While a November rate cut appears unlikely, the bank’s dovish tone has fueled speculation that the RBA could cut rates to just 0.5% in February.
Pound (GBP) Supported as Manufacturing PMI Beats Expectations
The Pound (GBP) was able to press its advantage against the weakened Australian Dollar (AUD) this morning, part in thanks to the latest UK manufacturing PMI.
According to data published by IHS Markit, UK factory growth contracted less than expected in September, with the manufacturing index rising from 47.4 to 48.3 against expectations of a slide to 47.
While the UK’s manufacturing sector remains firmly in contraction territory, the stronger-than-expected reading could help the UK’s private sector narrowly avoid a contraction as a whole in September.
However, while the headline figure showed some improvement, the index as a whole still made for some gloomy reading, with analysts expressing concern about the accelerated rate of job losses in the sector.