RBA Minutes Omit Key Rate Statement – Pound Australian Dollar (GBP/AUD) Exchange Rate Forecast POSITIVE
The outlook for the Pound Australian Dollar (GBP/AUD) exchange rate improved on Tuesday morning as markets responded to a rather dovish omission from the Reserve Bank of Australia’s (RBA) June meeting minutes.
The RBA appeared to downgrade its monetary policy outlook by removing a line in the minutes that read as follows:
‘Members agreed that it was more likely that the next move in the cash rate would be up, rather than down’.
This suggested that the bank’s policymakers were now having second thoughts regarding the country’s economic outlook, with meagre levels of wage growth and a great deal of slack in the Australian labour market leaving many sceptical that a rate rise will occur before the year is over.
‘On balance, it appears that the RBA has increased uncertainty around how the economy will evolve’, surmised Joanne Masters, Economist at ANZ Research.
‘Given the degree of uncertainty around the global economy and how the domestic credit tightening will evolve, we think it is not surprising that the Bank may be somewhat less confident about how these risks will play out’.
This news, combined with escalating trade tensions between the US and China, has made the outlook for the Australian Dollar rather dreary.
Markets Prepare for BoE Rate Decision – What can we Expect for the Pound Australian Dollar (GBP/AUD) Exchange Rate?
The main event for the markets this week will be the Bank of England (BoE) rate decision, due on Thursday, with the policy statement and press conference afterwards to be carefully scrutinised by investors.
Analysts do not expect a rate hike at this meeting, instead, economists are hoping that the bank will lay the groundwork for a rise in August – perhaps citing the strength of the UK’s labour market or the UK’s Q2 economic recovery.
If this occurs then we could see the Pound Australian Dollar (GBP/AUD) exchange rate rally.
If the bank proves coy, however, or if investors cite global uncertainty regarding trade and a lack of progress in Brexit negotiations then we could see a muted response for Sterling.
US Threatens $200bn in Tariffs on Chinese Goods – Australian Dollar (AUD) Exchange Rate Outlook in the Doldrums
Once again, the outlook for the Australian Dollar (AUD) remains heavily under the influence of escalating trade tensions between Australia’s two largest trading partners, the US and China.
On Tuesday the Trump administration announced plans for $200bn more in tariffs targeting Chinese imports, threatening that they would come into effect if China ‘refuses to change its practices’.
These ‘practices’ referred to the unfair acquisition and use of American intellectual property and technology, as well as China’s already substantial trade surplus with the US.
Thus far, China has responded with promises to ‘fight back firmly’, but given that they have a large surplus to potentially lose, the US will likely remain confident in its demands.
The Australian Dollar and other risky commodity currencies will likely continue to feel the brunt of these escalations, with investors favouring safer investments until the storm passes.