- Bank of England (BoE) keeps monetary policy unchanged
- BoE minutes reveal concerns about ‘Brexit’, Pound softens
- Australian Dollar climbs on positive labour market data
- GBP/AUD exchange rate forecast to hold losses ahead of Chinese GDP
Pound Sterling (GBP) Exchange Rates Dive on Dovish BoE Minutes
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate declined by around -1.0% during Thursday’s European session.
As was expected by most analysts, the Bank of England (BoE) opted to hold the official cash rate at the record-low 0.50%. The Pound extended losses in the aftermath of the decision, however, thanks to the publication of dovish minutes. Whilst traders had predicted that ‘Brexit’ concerns would impact on policy, the latest minutes were the first that confirmed the notion.
Policymakers stated that a vote to leave the EU would extend the period of uncertainty which has plagued the Pound since the turn of the year.
‘Such a vote might result in an extended period of uncertainty about the economic outlook, including about the prospects for export growth,’ the Monetary Policy Committee (MPC) said in minutes from today’s meeting. ‘This uncertainty would be likely to push down on demand in the short run… [and] have significant implications for asset prices, in particular the exchange rate.’
Also weighing on demand for the British unit was disappointing domestic data. March’s RICS House Price Balance was forecast to hold at 50%, but the result actually dropped to 42%; a nine-month low.
‘Elections inevitably bring with them periods of uncertainty in the market, and our figures would suggest that next May’s devolved elections are no exception. Likewise, the EU referendum, is likely to be an influencer in terms of the damper outlook for London in particular,’ said Simon Rubinsohn, chief economist at RICS.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate dropped to a low of 1.8313 during Thursday’s European session.
Australian Dollar (AUD) Exchange Rates Rally despite Dampened Market Sentiment
Global stocks volatility and falling commodities prices caused market sentiment to dampen on Thursday. However, the risk-correlated Australian Dollar wasn’t adversely affected by the risk-off mood thanks to very positive results from domestic labour market data.
March’s Unemployment Rate was predicted to rise from 5.8% to 5.9%, but the actual result dropped to 5.7%, which is a fresh 2 ½ year low. Additionally, March’s Employment Change bettered expectations of 17,000 newly employed with the result actually showing an increase of 26,100.
‘There’s clearly a trend now of a stronger labour market than many analysts were allowing for, which is consistent with other positive economic indicators,’ said economist Shane Oliver in response to Australia’s labour market data. ‘Any hope of an imminent rate cut is well and truly out the window on the back of these figures.’
Some analysts feel that the positive labour market conditions will prevent the Reserve Bank of Australia (RBA) from easing monetary policy even if inflation remains weak. ‘Underlying labour market conditions remain solid even if not as strong as in 2015,’ said senior economist Justin Fabo. ‘This will keep the RBA on the side-lines even if inflation prints low.’
GBP/AUD Exchange Rate Forecast: Chinese GDP to Provoke Volatility
Given the complete absence of any further British or Australian data today, there is a high chance that the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate will hold losses for the remainder of Thursday’s trade.
Friday should see significant GBP/AUD exchange rate volatility in response to a number of Chinese ecostats. Most significant of which will be Gross Domestic Product. With that said, China’s Retail Sales and Industrial Production data will also be very likely to impact on the Australian Dollar.
As the session progresses the Pound may see volatility in response to Construction Output data. However, given today’s dovish MPC minutes and ongoing political uncertainty regarding the EU referendum, the British Pound is unlikely to make any notable gains.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate reached a high of 1.8589 during Thursday’s European session.
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