While the Reserve Bank of Australia (RBA) reacted positively this morning to the lack of a Fed hike, Bank of England (BoE) policymaker Andy Haldane suggested that rate cuts may now be in line, prompting the GBP/AUD currency pair to downtrend strongly.
No Move from Federal Open Market Committee (FOMC) Propelled GBP/AUD Exchange Rate into Slump as ‘Aussie’ Appeal Rose
After having moved on a steady uptrend throughout the day on Thursday in anticipation of the Federal Open Market Committee (FOMC) Rate Decision, the GBP/AUD currency pair was pulled down into an abrupt slump at 2.1492. The decidedly dovish tone of policymakers sufficiently spooked traders into leaving the ‘Greenback’ (USD) as the holding of interest rates at their record low of 0.25% benefitted both emerging market and commodity currencies. As a result, the ‘Aussie’ (AUD) was shored up by the weaker ‘Buck’ and the generally positive outlook this rate hold is considered to have on the wider global economy.
Reserve Bank of Australia (RBA) Reiterated Confidence Today as Pound (GBP) Dived on Bearish Bank of England (BoE) Statements
This morning saw Reserve Bank of Australia (RBA) Governor Glenn Stevens speak in Canberra, offering the first major reaction to yesterday’s FOMC call. Taking a generally more optimistic tone than his US counterpart, Stevens estimated that the Fed would still be moving to raise interest rates before the end of the year and iterated that he remains confident in the ability of the Australian economy to continue weathering the global slowdown. An insistence that the RBA remains content with the current level of domestic interest has helped buoy the antipodean currency higher across the board again today.
Also weighing on the Pound (GBP) is the relative decrease in prospects for a near-term Bank of England (BoE) interest rate rise, with the hawkishness of BoE Governor Mark Carney potentially undermined by the cautiousness of the Fed. Fellow Monetary Policy Committee (MPC) member Andy Haldane has today restated his opinion that it remains too early to consider a hike at this juncture and that a cut might even been on the cards in the near future, with the GBP/AUD exchange rate trending lower in response.
GBP/AUD Exchange Rate Forecast: ‘Aussie’ may Stay on Bullish Form with Upcoming Australian Housing Figures
With UK data releases limited in the coming week, the ‘Aussie’ stands to remain the dominant force in the pairing. Tuesday’s UK Public Sector Net Borrowing may provide the impetus for a Sterling rally, however, if it produces another definite drop to suggest a decrease in the nation’s budget deficit. A bearish result, on the other hand, could see the GBP/AUD conversion rate cede more ground owing to a decline in Pound optimism.
It’ll be an equally slow data week on the Australian side of things, with the only major domestic mover likely to be the second quarter House Price Index. Stability and improvement in the local housing market would lend support to the current strength of the South Pacific currency and extend the gains of the ‘Aussie’.
Current GBP, AUD Exchange Rates
At time of writing, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is down in the range of 2.1542, with the Australian Dollar to Pound Sterling (AUD/GBP) pairing climbing around 0.4640.
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