Pound to Australian Dollar (GBP/AUD) Exchange Rate Firms on RBA Interest Rates Decision

July 14, 2014 - Written by David Woodsmith

STORY LINK Pound to Australian Dollar (GBP/AUD) Exchange Rate Firms on RBA Interest Rates Decision

The Pound to Australian Dollar (GBP/AUD) exchange rate firmed today after the Reserve Bank of Australia left interest rates on hold and signalled that rates would remain unchanged for an extended period of time.

In its July minutes the RBA reiterated that rates will stay stable as they are ‘working to support demand’.

The AUD complex takes the following levels:

- The pound to australian dollar exchange rate is +0.61 per cent higher at 1.83067.
- The australian dollar to euro exchange rate is -0.1 per cent lower at 0.68875.
- The australian dollar to pound exchange rate is -0.61 per cent lower at 0.54625.
- The australian dollar to us dollar exchange rate is -0.31 per cent lower at 0.93627.

With a lack of domestic data due from both the United Kingdom and Australia the Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate is expected to see light trading today.

The British Pound continues to find some support from expectations that the Bank of England will raise interest rates before the end of the year and managed to shrug off last week’s disappointing construction output data.

The report released on Friday showed that construction output in the UK fell by 1.1% in May marking the sectors biggest drop in production since the second month of this year. Despite that, year on year output remained higher by 3.5%.

The report added to a week of disappointment for UK data as it followed on the heels of a report released earlier in the week which showed that manufacturing production eased by 1.3% in May, the fastest declined recorded in 16 months.

Pound Sterling Exchange Losses Limited Over Interest Rate Speculation

The Pound Sterling initially softened against most of its major peers following the data releases but further losses were held in check as investors still expect the Bank of England to raise interest rates before the year ends.

The Australian Dollar meanwhile is holding onto its strength against its major peers despite expectations that the currency will begin to weaken as the year progresses. The currency was softened slightly last week as demand for perceived riskier commodity based currencies was weakened after fears were raised that Portugal’s largest listed bank was in poor health. Fears grew that the bank would require a bailout which could have led to contagion in the wider Eurozone and global economy.

The impacts of those concerns eased over the weekend after Portuguese Prime Minister Pedro Passos Coelho insisted that the government would not have to bail out the bank. The Atlantic facing nation only just recently dragged itself out of needing aid from the European Central Bank, any hint of further bailouts would be severely damaging to confidence in the so called Eurozone recovery.

“There is no reason for the state to intervene in a bank which has solid capital and which has a comfortable margin to deal with any eventuality, even the most adverse,” he told reporters.

Risk aversion remains on the cards however as conflicts in Ukraine, Iraq and Gaza have all continued to intensify in recent days. Gunmen killed 29 people in Baghdad, fighting continues in eastern Ukraine and Israel continued with its offensive against Hamas.

Concerns over a deteriorating situation in Yemen have also raised concerns after news broke that Yemeni tribesmen blew up a major oil pipeline in the troubled nation. Concerns over the world’s oil supply rose as a consequence.

Aus Dollar Forecast - Volatility Ahead

The Australian Dollar (AUD) could see movement on Tuesday due to the release of the latest RBA policy meeting minutes and as US Federal Reserve Chairman Janet Yellen testify’s before Congress. Investors will be looking for any hint as to when the world’s largest economy could begin to raise interest rates.

“We are still in a low volatility environment and with the Fed failing to bolster expectations for an eventual rate rise; the Aussie and Kiwi remain attractive prospects to pick up carry. This suggests that downside follow-through for the Australian Dollar may be limited. Traders are also closely watching GBP/USD as the pair teases at a breakout above its recent highs. Strong domestic economic data alongside hawkish comments from Bank of England officials have driven the pound higher this year,” said a forex trader.

The Pound Sterling could make gains tomorrow if the latest UK private sector retail sales and producer price inflation data come in positively.

GBP/AUD Update 15/07/2014

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Australian Dollar Forecasts Currency Predictions Daily Cur Forecasts