The final session of last week also proved to be a disappointing one for the Pound, as official UK government figures revealed that Britain’s trade gap had reached its highest level since 2005.
Foreign Currency Market Update – GBP / AUD Update
Price action for the GBP AUD exchange rate during last week’s session was determined by commentaries from the Reserve Bank of Australia and the Bank of England. In the end, the tale of two central banks spelled out a depressing story for the Pound to Aussie exchange rate, taking it all the way down to 1.5374, its lowest level for over two months, during trading last Wednesday.
The RBA released the minutes of its most recent policy meeting in the early hours of Tuesday morning UK time. Investors already knew that the policy committee had opted to cut interest rates by a further 25 basis points at the Bank’s most recent meeting, however the details of discussions which led to this decision proved to be surprisingly supportive for the Aussie. The minutes revealed that the decision to further loosen Australian monetary policy had been a hairline one, describing the argument between members as being ‘finely balanced’. Several members had resisted a rate cut, pointing to the relatively firm tone of recent domestic data releases, suggesting that Australia’s central bank may now opt to keep rates on hold for a protracted period, providing support for the Aussie Dollar.
Meanwhile, Wednesday morning’s Bank of England minutes triggered a move out of Sterling-denominated assets, which took GBP AUD lower. The minutes revealed that four of the Bank’s nine-man committee had voted in favour of an extension to the UK’s Quantitative Easing programme at June’s policy meeting, making it highly likely that next month’s decision will see further QE for the British economy – bad news for Sterling.
This week has begun with a mini-recovery for GBP AUD, as market participants scale back their exposure to risk ahead of this week’s European Union summit, causing a weakening of the risk-sensitive Aussie. Fears are growing that the meeting may dissolve into an unseemly argument between Greece’s new Prime Minister Antonis Samaras, and the leaders of wealthier Northern European states, following Samaras’ calls for the terms of his country’s austerity package to be loosened. If such a flashpoint does occur, then further upside is possible for GBP AUD. However, caution is advisable for clients needing to buy Australian Dollars in the near-term, as the pair has been trending downwards since its break to 1.6187 in the final week of last month.
Summary of major upcoming data releases that we think may move the market.
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Sterling Lacklustre, but Risk Aversion Hurting Aussie…
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Exchange Rate Hits New Record Low…
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – AUD stable as stocks rebound…
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Sterling Plunges toward all time lows
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Sterling rebounds from record lows