Pound Australian Dollar Exchange Rate Forecast: Losses Predicted for GBP AUD

Modified: Tuesday, 4 February 2014 16:51 BST - Written by Minesh Chaudhari

STORY LINK Pound Australian Dollar Exchange Rate Forecast: Losses Predicted for GBP AUD

The Pound Australian Dollar exchange rate (GBP/AUD) has plunged since last night’s European close following surprise comments overnight from the Reserve Bank of Australia (RBA). The Antipodean central bank announced during the early hours that it will be maintaining its key lending rate at 2.50%, as per analysts expectations, however the accompanying comments caught analysts on the back foot.

RBA Governor Glen Stevens dropped his previously dovish rhetoric, observing that the weaker Aussie of recent weeks will assist his nation’s economy if its relative value remains at current levels. In comparison, Stevens’ December statement noted that the Australian unit remained ‘uncomfortably high’. The clear inference from these comments is that the RBA is no longer considering cutting interest rates.

The Australian Dollar flourished against the other majors in response, sending the GBP AUD exchange rate down to as low as 1.8265 earlier; the pair had been changing hands at above the 1.9000 level as recently as last Thursday. The sharp retracement which has followed for the pair has lead many analysts to forecast that GBP AUD has now reached a top – the pair gained almost 50c from last April until last week, so perhaps such a move was overdue. The RBA gave the Australian tender the fundamental push which it needed in order to stage such a comeback. The next significant band of support heading lower for GBP AUD comes at 1.6645 – a level last reached during the second half of last October.

Elsewhere, the past 24hrs have also brought a significant shift out of risk-laden assets from institutional investors which has resulted in an intraday loss of 4.18% for Tokyo’s benchmark Nikkei 225 index last night. The broad-ranging S&P 500 index in the US had given up over 2.00% of its value by last night’s closing bell. The downward move in the S&P 500 represented its biggest daily loss since the start of last Summer and the main beneficiary of the move may well prove to be the US Dollar which has increasingly displayed the marks of a safe haven unit during recent weeks.

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