As the week came to a close the Australian dollar exchange rate rallied strongly against the Pound after the People’s Bank of China cut benchmark rates by 0.25 percentage points to 2.75 percent%
The Pound to Australian Dollar (GBP/AUD) exchange rate advanced above the 1.82 level on Thursday as weak data out of China weighed upon the ‘Aussie’ and as UK retail sales data supported the Pound. The currency pair is forecast to end the week in the region of 1.82.
On Wednesday the Pound to Australian Dollar (GBP/AUD) exchange rate continued to push above the 1.80 level as investors turned to safer options due to market sentiment being dented by the news from Japan that snap elections will be held next month.
The currency pair was also bolstered by the minutes from the Bank of England as they came in more hawkish than economists were expecting. As a result the Pound surged higher against a number of major peers.
The Pound to Australian Dollar (GBP/AUD) exchange rate continued to trade below the 1.80 mark on Tuesday after UK inflation data offered little in the way of support and as traders looked ahead to Wednesday’s Bank of England minutes release.
Traders shrugged off comments by the RBA, which repeated the view that the Australian Dollar remains overvalued. Despite the sharp falls in commodity prices seen over the past few weeks the ‘Aussie’ has held onto gains as the nations comparatively high interest rates appeal to investors.
‘Despite the recent appreciation of the exchange rate, the Australian Dollar remained above most estimates of its fundamental value, particularly given the further declines in key commodity prices over the course of the year to data. As a result, the exchange was offering less assistance than would normally be expected in achieving balanced growth in the economy,’ said the RBA.
Instead, traders focused on the RBA’s reaffirmation that it intends to keep interest rates unchanged at record lows in order to support economic growth.
Also supporting the ‘Aussie’ was news that Australia and India are coming closer to signing a free trade pact deal. The positive news comes a day after Australia signed an historic trade deal with China.
Further gains for the ‘Aussie’ against the Pound will be restrained as the latest UK inflation data matched economist forecasts.
On a monthly basis UK, inflation rose by 0.1% and climbed by 1.3% on a year on year basis. Annual Core inflation however came in below expectations by remaining stagnant at 1.5%, below forecasts for a rise to 1.6%.
The Office for National Statistics said; ‘smaller falls in transport costs than a year ago – notably for motor fuels and air fares, and price rises for computer games were the main contributors to the rise in the rate of inflation. Food and fuel prices continue to fall, knocking 0.3 percentage points off the Consumer prices index.’
The rise to 1.3% eased some fears over the UK inflation rate but the rate remains well below the Bank of England’s target rate of 2%. The fact that inflation did not fall as many had expected will be seen as a positive for the Pound.
