The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate advanced close to a two-week high on Tuesday.
The GBP/AUD exchange rate hit a session high of 1.992
Falling commodity prices continued to put pressure on the Australian Dollar and reduced market sentiment towards perceived riskier assets played its part in weakening the currency. The main factor weighing on the ‘Aussie’ however is the upcoming congressional testimony due to be given by Federal Reserve Chairman Janet Yellen.
Strong US Dollar & Iron Ore Prices Weigh
‘Trader sentiment continues to support the stronger US Dollar view. We are seeing traders jostle for position ahead of Janet Yellen’s testimony to the US Congress. The US Dollar could either soar or plummet, depending on what Dr Yellen has to say about the possibility of any rate hikes,’ said Stephen Innes, a senior trader at OANDA Asia Pacific.
The Pound too could surge or tumble depending on what Bank of England Governor Mark Carney says when he testifies to the House of Commons Treasury Committee. Any signs that the bank’s policy makers are getting closer to raising interest rates will bolster the Pound but a more dovish testimonial and we can expect Sterling to fall.
Also weighing on the Australian Dollar was data released in neighbouring New Zealand, which showed inflation is expected to fall sharply in the Trans Tasman region.
According to the Reserve Bank of New Zealand its inflation expectation for the next two years fell to 1.8% in the first quarter of 2015, a drop from the previous figure of 2.06% seen in the final quarter of last year.
‘It is a contagion from the sharp decline in the New Zealand Dollar following the disappointing inflation expectation report, which trickled down into the Australian Dollar. The second reason for the fall is the broad-based firmness in the US Dollar,’ said Elias Haddad, senior currency strategist at Commonwealth Bank of Australia.
Pound Sterling to Australian Dollar Exchange Rate Forecast
The GBP/AUD exchange rate is forecast to strengthen in the long term as concerns over the strength of the Australian economy look set to cause the nation’s Central Bank to further talk down the value of the currency and potentially make another cut to interest rates in March.
The main event for the Pound this week will be the second estimate GDP data due to be released on Thursday. The currency could give up some ground if the data disappoints.
