The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate gave up yesterday’s strong gains as the ‘Aussie’ displayed its stubbornness and rallied despite the surprise interest rate cut by the Reserve Bank of Australia.
The GBP/AUD Exchange Rate hit a session low of 1.933
The Australian Dollar’s gains were supported by the release of mixed economic data out of the United States, which sent the US Dollar falling and allowed the ‘Aussie’ to move higher.
An increase in oil prices, and easing concerns over a possible standoff between Greece and its creditors in the Troika helped to improve market sentiment.
The stubbornness of the Australian Dollar is likely to increase speculation that the RBA will make another interest rate cut at March’s policy meeting as it seeks to weaken the currency further.
‘Low Australian interest rates and commodity prices, and a strong US Dollar, should continue to weigh on the AUD during the next few months. The next major downside target is US75 cents. However, before that there’s potential for a corrective bounce,’ said Imre Speizer, a market strategist at Westpac.
Australian Dollar Exchange Rate Weakness Forecast
The Australian Dollar is forecast to decline over the coming months but the drop may be a gradual process, as the currency remains stubborn.
Falling commodity prices and a softening economy are expected to put pressure on the RBA to make another interest rate cut next month and as that policy meeting draws nearer, the ‘Aussie’ will likely soften on speculation.
Did the RBA Manipulate the AUD Exchange Rate?
Suspicions that the RBA is manipulating the currency to aid iron ore exporters were raised on Tuesday. An American Iron ore miner said that the RBA was making a big mistake by assuming that Australia iron ore producers will be able to hold out and force their competitors in China and Brazil out of business.
The speculation will raise concerns over the mining sector and is likely to put pressure on the currency.
‘The situation is starting to smell bad in Australia. The Australians have very little to do at this time beyond continuing to manipulating their currency. Despite that we are already seeing lay-offs and mines shutting down throughout the entire Australian iron ore mining landscape,” said Lourenco Gonclaves, chief executive at Cliffs Natural Resources.
