Pound to Australian Dollar Exchange Rate Volatility Forecast on RBA Meeting Minutes

September 16, 2016 - Written by Toni Johnson

STORY LINK Pound to Australian Dollar Exchange Rate Volatility Forecast on RBA Meeting Minutes

Pound Sterling (GBP) Exchange Rates Weighed Down by Prospect of BoE Easing

While investors were initially relieved that the Bank of England (BoE) had left interest rates unchanged by unanimous vote it wasn’t long before Pound Sterling (GBP) returned to a downtrend.

Of particular concern was the fact that the Monetary Policy Committee (MPC) maintained that it remains willing to cut interest rates further if the domestic economy shows signs of weakening in the wake of the Brexit vote.

Even though third quarter data is expected to show continued resilience confidence seems to be predominantly attributable to consumers rather than businesses, many of which remain cautious due to the uncertainty still surrounding the UK’s exit from the EU.

As a result the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate remained on a downtrend ahead of the weekend, despite an increased atmosphere of risk aversion.

Risk Aversion Failed to Bolster the GBP/AUD Exchange Rate

US data remained rather mixed on Friday, something that kept the odds of an imminent Federal Reserve rate hike up in the air.

As markets remain sceptical of the chances of the Fed raising interest rates next week the detrimental impact on the risk-sensitive Australian Dollar has been limited.

There are also hopes that with Philip Lowe taking over from Glenn Stevens as Governor of the Reserve Bank of Australia (RBA) that the bank may be less inclined to lower interest rates further.

Nevertheless, the bias for the ‘Aussie’ remains to the downside, with researchers at NAB noting:

‘There is some downside risk to our near-term forecasts given the recent loss of momentum in indicators of household spending in particular, but also business conditions. These bear close watching. The RBA will hold steady in the near-term, but two cuts are likely to follow in mid-2017 as low inflation persists.’

Australian Dollar (AUD) Exchange Rates Could Weaken on Dovish RBA Minutes

Volatility for the GBP/AUD exchange rate should be expected in response to the RBA’s September meeting minutes, which could give more of an indication as to the outlook of the central bank.
Should the tone prove more dovish than investors anticipate then the Australian Dollar could return to a downtrend, particularly if the ANZ Roy Morgan Weekly Consumer Confidence Index fails to show an uptick.
Monday’s UK Rightmove House Prices data could offer the Pound a boost, meanwhile, if the domestic housing market continues to demonstrate strength in the wake of the EU referendum.

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