The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate rallied to advance by 0.50% as speculation increased that the Reserve Bank of Australia will cut interest rates a next weeks policy meeting, weak iron ore prices also weighed upon the ‘Aussie’.
Earlier the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate weakened on Tuesday as preliminary fourth quarter Gross Domestic Product (GDP) data out of the UK came in below forecasts and as investors locked in positions ahead of Wednesday’s Australian inflation data.
The GBP/AUD Exchange Rate hit a session low of 1.893
Earlier in the session, the GBP/AUD exchange rate had been firmer as data released in Australia showed that business conditions and confidence remained weak in December. The report published by the National Australian Bank (NAB) showed that its confidence index rose by less than 1 point to take the index to a reading of 2. Respondents were also relatively gloomy about business conditions, marking the index down 1 point to 4.
As the European session got under way, the ‘Aussie’ firmed to trade steadily as investors locked in positions ahead of Wednesdays inflation data. Many economists are forecasting that a weak figure will lead to the Reserve Bank of Australia cutting interest rates at next week’s policy meeting.
‘Markets are expecting a very weak reading. Also, the iron ore price has been smashed, literally, over the past few sessions, which has put the Aussie Dollar in the spotlight,’ said market strategist David Schutt from Scutt Partners.
Also in focus is the Federal Reserve’s policy meeting.
A more dovish statement made by the Fed will likely offer support to the ‘Aussie’ but a more hawkish statement which could hint that a rate hike in the world’s largest economy is getting closer would have the opposite effect.
Sterling Falls on GDP Data
The Pound weakened against the ‘Aussie’ and many of its most traded peers as a preliminary report showed that the UK economy expanded at a slower pace than forecast in the fourth quarter of the year.
According to the Office for National Statistics (ONS) GDP, growth slowed to 0.5% from 0.7% on a quarterly basis and grew by 2.7% on an annual basis. Both the quarterly and annual figures were below economist expectations.
The report showed that output increased in two of the economies four main industrial groups during the fourth quarter. Output in the services sector rose by 0.8% and agriculture rose by 1.3%. In contrast, output tumbled by 1.8% in the construction sector and eased by 0.1% in manufacturing production.
Despite being just a preliminary report, the Pound weakened against many of its major peers.
The GBP/AUD Exchange Rate hit a session high of 1.913
