The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate advanced on Monday due to the closure of ‘Aussie’ financial markets for the Australia Day National holiday and as pressure builds on the Reserve Bank of Australia (RBA) to cut interest rates.
Economists are forecasting that the Australian Dollar will remain under pressure over the coming week as market attention focuses on upcoming consumer price data, the US Federal Reserve’s policy meeting and next week’s RBA policy meeting.
Events in the Eurozone, falling commodity prices and record low interest rates in most developed economies are piling pressure on the RBA to take action. According to National Australia Bank, the markets are pricing in a rate cut of 0.5%.
‘I think people are still keen to be short the Aussie running into the CPI this week on expectations that the data will continue to fuel speculation that RBA rate cuts are on the way. The Aussie will struggle to be bid ahead of the RBA meeting next week. However if the RBA doesn’t change its language in inflation and the interest rate outlook, the local unit could be subject to a pretty sharp rally,’ said Raiko Shareef, Bank of New Zealand currency strategist.
Market attention will also be focused upon the US Federal Reserve’s latest policy meeting and interest rate decision. Traders will be looking to see whether policy makers are becoming more hawkish over the strength of the world’s largest economy.
Any concerns that slowing global growth is negatively affecting the US economy could soften the ‘Greenback’ and increase speculation that a US interest rate hike will be delayed.
Risk Aversion Eases
Further gains for the Pound were restrained on Monday as market sentiment recovered slightly as traders deemed that an election victory for the anti-austerity Syriza party would not lead to Greece leaving the Eurozone.
The election result will now put Greece’s new coalition government on a collision course with Germany as the Eurozone’s largest economy said that Greece will not receive debt relief.
Future Currency forecast:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound,
,Australian Dollar,1.8964 ,
Euro,,Australian Dollar,1.4193 ,
US Dollar,,Australian Dollar,1.2632 ,
Australian Dollar,,Pound Sterling,05271 ,
[/table]
