RBA Meeting Minutes Fail to Bolster Demand for Australian Dollar (AUD)
It was something of a mixed bag for the December Reserve Bank of Australia (RBA) meeting minutes, as policymakers expressed confidence in the current state of the economy but nevertheless indicated that further interest rate cuts could be on the table in 2016. With the Australian stock market at a two-year low, the ‘Aussie’ (AUD) has been ceding back some of its recent gains overnight. Consequently, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has been on an uptrend in the range of 2.0911.
Earlier…
A softened Pound Sterling (GBP) has been on a strong downtrend against the Australian Dollar (AUD) today, in spite of persistent commodity price weakness.
GBP/AUD Exchange Rate Trended Higher after Bullish Australian Employment Data
While the ‘Aussie’ (AUD) saw a substantial boost on Thursday in response to some unexpectedly strong domestic employment figures, much of its lead against the Pound (GBP) was eroded ahead of the weekend. Defying forecasts, the Australian Unemployment Rate dropped to 5.8%, as 71,400 employees were added to domestic businesses, suggesting that the local economy was in a far more robust state than previously thought. However, after the initial burst of investor optimism there was an increasing mood of scepticism towards the bullish figures which helped to drag the Australian Dollar down.
Some of the disappointment of the Bank of England’s (BoE) more dovish policy meeting was counteracted on Friday as the BoE/GfK 12-month inflation forecast equally remained unchanged. Demand for Sterling was bolstered further by the IMF’s more positive assessment of the UK economy, although the fund did highlight some significant downside risks that could derail its recent trend of growth. Nevertheless, pundits were encouraged by the IMF’s suggestion that the BoE would be right to keep interest rates lower until domestic inflation showed greater signs of picking up.
Pound (GBP) in Severe Slump as Rightmove House Prices Disappoint
As the People’s Bank of China (PBOC) has suggested that it could remove the peg that ties the Yuan (CNY) to the US Dollar (USD) there has been a fresh surge in demand for the Australian Dollar on Monday. With the PBOC apparently looking to mitigate the impact of Wednesday’s potential Fed rate hike the weakening Yuan has helped to boost the ‘Aussie’ and other Australasian rivals, in spite of global commodities facing another day of weakness.
The Pound has slumped sharply across the board today, meanwhile, after a more discouraging Rightmove House Prices report. Housing prices climbed from 6.2% to 7.4% on the year in December, suggesting that the market is increasingly in a bubble, although the index nevertheless slipped on the month by -1.1%. Despite the BoE having highlighted its concerns with the domestic housing market, traders were concerned by the continuing signs of an excessive acceleration in prices, driving Sterling down against rivals.
GBP/AUD Exchange Rate Forecast: RBA Meeting Minutes to Trigger ‘Aussie’ Movement
Some of the wind may be taken out of the Australian Dollar’s sails overnight, however, as the minutes for the Reserve Bank of Australia’s (RBA) December meeting are due for publication. Should policymakers be shown to have more extensively considered the possibility of monetary loosening the outlook of the ‘Aussie’ is likely to take a blow.
Conversely, if the latest UK Consumer Price Index clocks in as forecast the Pound is expected to rally on Tuesday. Forecasts suggest that domestic inflation rose from -0.1% to 0.1% in November, with such a pickup in inflationary pressure likely to increase the odds of a nearer-term interest rate move from the BoE.
Current GBP, AUD Exchange Rates
At time of writing, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was slumped in the region of 2.0909, while the Australian Dollar to Pound Sterling (AUD/GBP) pairing was making strong gains around 0.4781.
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