The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate strengthened by around 0.20% on Wednesday morning.
As traders await minutes from the most recent Bank of England (BoE) policy meeting, the Pound is generally holding steady versus the majority of its most traded currency peers. The Australian Dollar, meanwhile, softened versus most of its currency rivals thanks to US Dollar strength.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.9620.
Yesterday…
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate softened by around -0.68% on Tuesday.
After British inflation fell into negative territory for the first time since 1960, the Pound softened versus the majority of its most traded currency rivals. The depreciation wasn’t as dramatic as it could have been, however, given that the Bank of England (BoE) had forecast a dip into deflation for some time and don’t expect it to be a sustained issue.
The Australian Dollar, meanwhile, declined versus the majority of its most traded currency competitors thanks to the strength of the US Dollar. Additional declination can be attributed to a combination of disappointing domestic data and the Reserve Bank of Australia (RBA) meeting minutes which showed further easing has not been ruled out.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.9458.
Pound Sterling (GBP) Exchange Rate Forecast to Soften Versus the US Dollar on UK Consumer Prices
Although a dip into deflationary territory was expected by most analysts, the soft Consumer Prices has seen the Pound decline versus the majority of its most traded rivals. On the year, April’s Consumer Price Index hit -0.1%. In addition, the Core CPI measure failed to meet with the median market forecast 1.0% in April, with the actual data result at 0.8%.
‘For now, it represents an obstruction to a BOE rate hike,’ said Alan Clarke, an economist at Scotiabank in London. ‘Enjoy it while it lasts because there is a good chance that inflation will be back in positive territory next month.’
In a typical political spin, Chancellor of the Exchequer George Osborne described the annual fall in prices as ‘good news for family budgets’ and said it should not be mistaken for ‘damaging deflation.’
‘Instead we should welcome the positive effects that lower food and energy prices bring for households at a time when wages are rising strongly, unemployment is falling and the economy is growing,’ he said in a statement. ‘Of course, we have to remain vigilant to deflationary risks and our system is well equipped to deal with them should they arise.’
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has fallen to a low of 1.9450 today.
Australian Dollar (AUD) Exchange Rate Forecast to Decline Versus the Pound as RBA Minutes Heighten Rate Cut Speculation
The RBA minutes from the most recent policy meeting opened the door for more easing in the South Pacific nation as policymakers attempt to combat the overvalued currency. This caused the ‘Aussie’ (AUD) to soften versus the majority of its most traded currency rivals.
‘On balance, taking all these factors into account, the board decided that the best course was to ease monetary policy further at [the May 5] meeting,’ the minutes say. ‘Members agreed that, as at the time of the reduction in the cash rate in February, the statement communicating the decision would not contain any guidance on the future path of monetary policy. Members did not see this as limiting the board’s scope for any action that might be appropriate at future meetings.’
Additional losses can be attributed to March’s Conference Board Leading Index, a composite index used to forecast short to mid-term growth in the Australian economy, which softened by -0.1%.
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Hold Losses ahead of US Data
As traders await US economic data, due for publication later on Tuesday afternoon, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is likely to hold losses. Should the US data print positively, however, there is the potential for the ‘Aussie’ to dive significantly.
Wednesday should see GBP/AUD volatility with BoE minutes and Australian Consumer Confidence due for publication.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate climbed to a high of 1.9660 today.
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