The Australian Dollar firmed against the Pound on Wednesday as investors embarked on a bout of Pound profit taking after the Bank of England’s policy meeting minutes for June lent further support to the notion that UK interest rates could rise this year.
The minutes showed that inflation was one of the major factors which would determine a rate hike. Following yesterday’s UK inflation data which showed that inflation fell to its lowest-level in over four years investors were disappointed.
Wage growth was highlighted as another factor and that too has disappointed in recent months.
The minutes also showed that policy makers voted 9-0 in favour of maintaining interest rates at the record low of 0.5%.
“For some members, the policy decision had become more balanced in the past couple of months than earlier in the year. In terms of immediate policy decision, however, all members agreed that, in the absence of other inflationary pressures, it would be necessary to see more evidence of slack being absorbed before an increase in Bank Rate would be warranted,” said the minutes.
Against the US Dollar the ‘Aussie’ is forecast to fall as investors expect that tonight’s US Federal Reserve policy meeting statement will prove to be more hawkish on raising interest rates. The ‘Greenback’ is continuing to find support from yesterday’s better-than-forecast inflation data. Consumer prices in the world’s largest economy increased by 0.4% bringing the annual inflation rate to 2.1% and were the fastest monthly increase recorded in over a year.
The Central Bank is also expected to cut its quantitative easing programme by another $10 billion, a move that will ease the ‘Aussie’. If the meeting gives a strong indication that a rate rise could occur sooner than mid-2015 then we can expect the US currency to rally strongly against most of its peers and not just its Australian relation.
Earlier Wednesday, the Conference Board said its leading index for Australia fell 0.1% in April, after a flat reading the previous month.
Australian Dollar (AUD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Australian Dollar,
,US Dollar,0.9337 ,
Australian Dollar,,Pound Sterling,0.5508 ,
Australian Dollar,,Euro,0.6890 ,
Australian Dollar,,New Zealand Dollar,1.0776 ,
US Dollar,, Australian Dollar ,1.0711 ,
Pound Sterling,, Australian Dollar ,1.8154 ,
Euro,, Australian Dollar ,1.4515 ,
New Zealand Dollar,, Australian Dollar ,0.9283 ,
[/table]
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