Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Climbs
As trading resumed for another week, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate gained 0.2% to trade in the region of 1.8991.
The Australian Dollar also continued trending lower against its US counterparts as speculation regarding a possible rate cut from the Reserve Bank of Australia (RBA) mounts.
According to industry expert Kumar Palghat; ‘There is an increasing possibility that the RBA – just like the Bank of Canada – takes an insurance policy by cutting rates. Whether they do it this month or next is only a matter of time’.
Economist Bill Evans also noted; ‘What we’re seeing is a lot of central banks are making surprise decisions at the moment, Canada, India, Denmark. So in this environment of central banks pushing rates down and adopting easing strategies it becomes a lot more respectable to do that. After the Bank of Canada, an RBA move downward “wouldn’t surprise the market” as much’.
Earlier…
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate advanced this week as economists bet that the Reserve Bank of Australia (RBA) will be one of the next central banks to adjust policy in the face of global economic pressures.
GBP/AUD Exchange Rate Advances on BOC, ECB Decisions
Although the Pound fell against the ‘Aussie’ following the publication of dovish minutes from the latest Bank of England (BoE) policy meeting, the British currency recovered ground after the Bank of Canada (BOC) surprised investors by cutting interest rates.
The BOC had kept rates on hold for four years, but opted to cut the benchmark rate from 1.0% to 0.75% in reaction to the extensive slide in oil prices.
The decision prompted speculation that both the RBA and Reserve Bank of New Zealand (RBNZ) might be encouraged to slash borrowing costs in order to counter commodity market chaos, and the ‘Aussie’ and ‘Kiwi’ fell as a result.
Both the price of iron ore (Australia’s key commodity) and dairy produce (New Zealand’s main export) have fallen dramatically over the past six months.
The European Central Bank’s (ECB) decision to introduce an extensive quantitative easing programme also had a negative effect on the Australian Dollar and the South Pacific currency slumped below 80 cents against the US Dollar.
Some industry experts are anticipating further ‘Aussie’ declines.
According to economist Shane Oliver; ‘Many economists are thinking, well, the Dollar’s had a big fall and we’ll stabilise. But I think that’s unlikely. I think the most likely scenario is we’ll continue to head down, reflecting the weakness in commodity prices.’
Demand for the Australian Dollar was also limited due to falling copper prices.
Copper fell for a third consecutive week, prompting this response from analyst Edward Meir; ‘The fundamental story is very weak for copper. The stockpile rise is telling us that supplies are ample.’
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast
Whether or not the RBA decides to jump on the policy adjusting band wagon is likely to be dependent on the strength of domestic data published during the build up to their next policy meeting.
Over the next five days the Australian report with the most potential to sway policymakers will be the nation’s Consumer Price Index.
Slowing inflation could encourage the central bank to cut interest rates in the very near future.
As stated by The Guardian; ‘The inflation figures, in particular, are shaping up as the key data to watch, with most economists tipping the annual inflation rate to come in below 2%, with underlying inflation towards the lower end of the RBA’s 2-3% target range. That could give the RBA not only room to cut rates, but a reason to do so, if recent moves from international central banks are any guide.’
Other Australian reports to focus on include the NAB Business Confidence/Conditions indexes, the Westpac Leading Index and the Conference Board Leading Index.
At the end of the week the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trading in the region of 1.8936
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trading in the region of 0.5272
