Dovish Reserve Bank of Australia Message Supports Pound Australian Dollar (GBP/AUD) Exchange Rate
The Pound to Australian Dollar (GBP/AUD) exchange rate found limited traction in the wake of the Reserve Bank of Australia’s (RBA) December policy announcement.
Demand for the Australian Dollar (AUD) generally weakened even as policymakers left interest rates on hold at 0.1% as widely expected.
With the RBA signalling that interest rates are unlikely to see any increase until 2024 investors saw limited reason to favour the antipodean currency.
As the central bank also maintained its quantitative easing measures this put additional pressure on AUD exchange rates, with monetary policy looking set to remain loose for some time to come.
A better-than-expected month of building permits growth was not enough to give the Australian Dollar any boost against its rivals, meanwhile.
Improved UK Manufacturing PMI Fails to Encourage Pound Gains
A slight upward revision to November’s UK manufacturing PMI offered little in the way of support to Pound Sterling (GBP), on the other hand.
As the impact of the initial surge in the manufacturing PMI had already largely been priced into GBP exchange rates this left little room for further gains.
The prospect of another wave of UK job losses in the face of the likely collapse of another major high street brand also put a significant dampener on the Pound.
Even so, the GBP/AUD exchange rate may still find a rallying point in the days ahead if the finalised UK services PMI sees an upgrade.
Evidence that the service sector experienced a less severe slowdown in November than initially thought could help the Pound to recover some of its lost ground.
Any signs of resilience within the sector may limit fears over the prospect of a major fourth quarter growth contraction, at least in the short term.
However, as long as the issue of Brexit remains unresolved this looks set to keep the GBP/AUD exchange rate under a degree of pressure for the foreseeable future.
Strong Third Quarter Australian GDP May Bolster Australian Dollar Demand
The Australian Dollar may find a boost in the days ahead, though, with the release of the third quarter Australian gross domestic product report.
With growth looking set to show a solid rebound in the wake of the second quarter’s -7% contraction the mood of AUD exchange rates could improve on Wednesday.
As long as the economy demonstrates a strong uptick in quarterly growth this should help to ease anxiety over the outlook, offering the antipodean currency a leg up against its rivals.
However, if growth fails to recover quite as sharply as markets anticipate this could expose the Australian Dollar to fresh selling pressure.
As the possibility of a fourth quarter growth slowdown remains any disappointment from the third quarter GDP may limit the potential for any GBP/AUD exchange rate losses.