Although disappointing UK fundamentals have taken a toll on the Pound to Australian Dollar (GBP/AUD) exchange rate this week, we forecast that the pairing could experience a positive shift following the publication of minutes from the latest Reserve Bank of Australia policy meeting.
Last week the ‘Aussie’ posted widespread declines after RBA Governor Glenn Stevens stressed that the local currency is overvalued by quite a considerable amount.
During a conference Stevens asserted; ‘Lest there be any uncertainty about this, let me be clear, again, that the exchange rate remains high by historical standards. When judged against current and likely future trends in the terms of trade, and Australia’s still high costs of production relative to those elsewhere in the world, most measurements would say it is overvalued, and not by just a few cents’.
The Australian Dollar was shaken by these words, shedding 0.5% against the US Dollar and falling notably against the Pound.
While the currency has since recovered much of this lost ground, if the minutes from the RBA’s recent meeting (which are scheduled for publication on Tuesday 15, adopt a similar rhetoric on the subject of exchange rate further ‘Aussie’ losses could be on the horizon.
In the view of industry expert Boris Schlossberg; ‘The RBA could surprise the market with another rate cut […] This would especially be true if the Australian Dollar exchange rate remains highly elevated, as the RBA continues to be concerned about the deteriorating terms of trade.’
This week the Pound to Australian Dollar exchange rate has been trading on the back foot as measures of the UK’s manufacturing, industrial and construction output all fell short of expected levels.
The ‘Aussie’ has even managed stealthy rebounds following the publication of slightly sub-par Chinese trade data and disappointing Australian employment reports.
The GBP/AUD pairing is currently trading in the region of 1.8221, down 0.2% on the day’s opening levels.
The USD/AUD exchange rate is also trending in a slightly softer position.
While next week’s RBA minutes may well prove to be the driving force behind Pound to Australian Dollar (GBP/AUD) exchange rate movement, other Australian data will also be of interest.
Reports to be particularly aware of include the Westpac Leading Index , the Conference Board Leading Index and National Australia Bank Business Confidence.
Investors with an interest in the Pound to Australian Dollar (GBP/AUD) exchange rate will also want to keep track of China’s Retail Sales and Industrial Production figures.
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, 0.9398,
Australian Dollar,,Euro, 0.6905,
Australian Dollar,,Pound, 0.5489,
Australian Dollar,,New Zealand Dollar, 1.0653,
US Dollar,,Australian Dollar, 1.0638,
Euro,,Australian Dollar, 1.4472,
Pound Sterling,,Australian Dollar, 1.8220,
New Zealand Dollar,,Australian Dollar, 0.9383,
[/table]
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