Australian Dollar Bullish as Reserve Bank of Australia Remains Confident in Economic Strength
The Australian Dollar has continued its bullish run today, although its advance has slowed to 0.5% after yesterday’s dramatic leap.
This can be attributed to several factors, including a weak Pound Sterling and the positive news from the labour market last Thursday. Economic data has shown that the economy is shifting gradually away from relying so heavily on mining activity, which has helped the ‘Aussie’ to withstand pressures caused by falling commodity prices such as copper and iron.
The GBP/AUD exchange rate is currently trading down -0.5% between 2.1157 and 2.1268.
Earlier…
The GBP/AUD exchange rate is down by 0.7% today, thanks in part to the continued optimism of the Reserve Bank of Australia (RBA) and trader profit taking weakening the US Dollar. The ‘Aussie’ has managed to rebound from yesterday’s drop in commodity prices to gain significant ground on Pound Sterling.
GBP/AUD Exchange Rate Forecast: Pound Sterling Remains Weak Despite Broadbent Comments
Deputy Bank of England (BoE) Governor Ben Broadbent spoke on Wednesday about the need for the Monetary Policy Committee (MPC) to focus on areas other than inflation when making interest rate decisions. Broadbent was one of eight doves to vote against raising interest rates at the last gathering, opposed only by Ian McCafferty. The comments made on Wednesday, at an event hosted by Reuters, struck a surprisingly hawkish tone as Broadbent claimed BoE statements were often misinterpreted and that the horizon for rate hikes is constantly moving.
The potential of another hawk on the board gave investors some confidence that a rate hike could be on the cards for early 2016 and saw GBP/AUD trading slightly up around a weekly high of 2.1495.
AUD/GBP Exchange Rate: RBA Meeting Minutes Show Continued Economic Optimism
The ‘Aussie’ has made rapid advances on the major currencies over the past few days thanks to strong jobs data, which showed that nearly four times the forecast number of jobs were created in October. An unexpected drop in unemployment further evidenced economic growth and saw the AUD/GBP exchange rate shoot up.
As a commodity correlated currency the ‘Aussie’ is affected by changes in commodity prices. The recent drops in copper and iron are likely to have an impact upon the Australian economy, although recent data and minutes from the RBA’s November 3rd meeting showed that mining activity declined, while growth in other sectors rose. A move away from reliance on minerals would likely protect the ‘Aussie’ from dramatic movement in the face of fluctuating commodity prices.
According to the minutes, ‘the Australian Dollar was adjusting to the significant declines in key commodity prices and boosting demand for domestic production. This had been most evident in the services sector, which had experienced strong employment growth over the past year. While measures of non-mining investment intentions had remained subdued, surveys of business conditions had strengthened to above-average levels.’
While the dropping price of oil is bad news for some economies, the RBA minutes note that the lower prices could help to fuel growth for Australia’s main trading partners.
The AUD/GBP exchange rate is currently up 0.7% to trade between 0.4665 and 0.4707.
GBP/AUD Exchange Forecast: Pound Sterling to Edge Lower Following Poor Retail Sales Data
The ‘Aussie’ will likely continue its bullish run this morning with the release of poor figures for UK Retail Sales. Month-on-Month (MoM) Retail Sales fell -0.9% in October after last month’s 1.5% rise, while Year-on-Year (YoY) sales experienced slower growth of 3.0%, compared to a forecast 3.9% and last year’s 5.7% increase. With Pound Sterling still floundering in the wake of a dovish Bank of England inflation outlook, the latest data is likely to pave the way for the Australian Dollar to make further gains.
The GBP/AUD exchange rate is currently trending between 2.1236 and 2.1418.
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