Pound to Australian Dollar (GBP/AUD) Rises as Earlier ?Aussie? Gains Fade

STORY LINK Pound to Australian Dollar (GBP/AUD) Rises as Earlier ?Aussie? Gains Fade

GBP/AUD Rebounds before RBA Minutes

The Pound managed to reclaim losses from earlier in the session against the ‘Aussie’ after the Chinese central bank introduced further easing in the economy. Monday’s market was extremely focused on the news from the People’s Bank of China that further easing was taking place with the reserve requirement ratio being cut by another 1.0%. The Australian Dollar is offered significant strength from any positive developments in China as the nation is Australia’s largest trading partner. Last week had caused concerns that China was still in a slowdown as weaker-than-expected data emerged.

Currency expert Robert Rennie stated: ‘To so quickly follow-up that data with a larger-than-might-have-been-expected RRR cut, you would expect that to help to offset some of the weakness that we saw in global equity markets late on the Friday session. What will be important over the next few days, with Chinese equities pushing higher, will we see improved prices in commodity markets in general? Is this enough to generate some further upside in commodity markets or was the PBOC already validating what was in the price?’

By way of data, the ‘Aussie’ could also experience fluctuations this week with the release of the Reserve Bank of Australia’s meeting minutes on Tuesday. The report has the potential to cause major fluctuations in the ‘Aussie’ exchange rate and any hawkish comments could bolster the commodity currency significantly.

UK General Election Approaches, Sterling Pressured

Meanwhile, the Pound’s coming under political pressure this week as we move ever closer to the highly anticipated UK general election. The Pound is expected to experience softness in coming weeks as investors’ price in the possibility of an untidy election. Furthermore, if the UK has a hung parliament, the Pound could be in for weeks if not months of choppy trading.

Liberal Democrat politician Nick Clegg commented on the prospect of another Conservative/Lib Dem coalition, saying: ‘I think if we were to enter into coalition again of course there would be much greater wariness. Of course there would be. It would be bizarre if people weren’t wary after the loss of MEP’s and councillors and so on. Of course people are wary.’

The idea of any coalition has left many UK citizens and investors with cold feet as the potential for political shakeup becomes a very real threat.

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Clegg continued: ‘Wariness is one thing. Imposing some pre-emptive fatwa on any coalition agreements, before people have their say is entirely another and we’re not doing that.’

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