Pound Australian Dollar Exchange Rate Forecast: Currency Market Focus on Australia RBA Could Send GBP/AUD Up

April 1, 2014 - Written by Frank Davies

STORY LINK Pound Australian Dollar Exchange Rate Forecast: Currency Market Focus on Australia RBA Could Send GBP/AUD Up

Currency market focus settled firmly on Australia during the overnight session, with the Antipodean nation’s Reserve Bank making its latest policy announcement.

The Australian Dollar was well supported in the aftermath of the RBA’s announcement that it would be maintaining its Official Cash Rate at its current level of 2.50%. As expected, it wasn’t the decision which proved to be market moving, but comments from Reserve Bank Governor Glenn Stevens afterwards which elicited a market move which sent the Pound Australian Dollar exchange rate down to 1.7909 GBP/AUD earlier. This was within a half a cent of the 4-month low which the pair struck at the end of last week. Meanwhile, the Australian US Dollar exchange rate spiralled to a fresh near-term high of 0.9304 AUD/USD.

The support for the Aussie, in spite of the ‘no change’ decision from the RBA, was driven by Governor Stevens’ assertion that domestic credit growth in Australia was picking up and that the past twelve months had shown a ‘significant’ improvement. The implication from this was that a hike in lending costs will soon be required in order to dampen the prospects of an Australian housing bubble emerging. However, the gains of today for the Australian unit are by no means guaranteed to persist given that Stevens also noted that the Australian tender remains ‘high by historical standards’. His attempts to ‘talk down’ the value of the Australian unit may increase as the next RBA interest rate hike draws closer.

Elsewhere, last night’s Asian session also brought the publication of a brace of Chinese economic surveys which painted a mixed picture of the current situation in the world’s second largest economy. March’s official PMI suggested that the key manufacturing sector of China’s economy is expanding at a slightly accelerated rate. However, HSBC’s version, released shortly afterwards, suggested that manufacturing was contracting at a marginally increased level. Either way, China’s vast economy is not performing as well as it was a few months ago, and that could send the Pound New Zealand Dollar GBP/NZD and Pound Australian Dollar GBP/AUD higher during coming months.

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