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Exchange Rates: Pound Surges Against Australian Dollar, Euro & US Dollar on More-than-forecast UK CPI

May 20, 2014 - Written by Toni Johnson

The Pound to Australian Dollar exchange rate (GBP/AUD) is closing in on its highest level in two-weeks after policy meeting minutes released by the Reserve Bank of Australia disappointed economists.

The Australian currency dropped after the minutes for the RBA’s May policy meeting showed that policy makers predicted that the nation’s economy has spare protracted capacity and that interest rates will remain at record lows for the foreseeable future.

The Pound Sterling to Australian Dollar exchange rate is trading up +0.84% at 1.81686 GBP/AUD.

“The board noted that overall growth in coming quarters was likely to be below trend given expected slower growth in exports, the decline in mining investment and the planned fiscal consolidation. The current accommodative stance of policy was likely to be appropriate for some time yet,” said the minutes from the RBA’s May 6th policy meeting.

The currency was also under pressure from concerns over a slowing Chinese economy, falling iron ore prices, a reduction in risk sentiment and a report released by the Conference Board.

The Conference Board’s leading index for Australia stagnated in March, a fall from the 0.2% rise seen in February.

The RBA’s deputy Governor Guy Debelle also warned that a decline in capital inflows from abroad could see the Australian Dollar weaken further.

Also piling pressure onto the ‘Aussie’ are concerns that Australia could lose its much prized AAA credit rating.

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Standard and Poor’s warned that the rating could be at risk if the Australian government doesn’t do more to cut the nation’s budget deficit.

The Pound meanwhile advanced against the majority of its peers after data showed that inflation in the UK increased more-than-forecast in April. The nation’s inflation rate rose from 0.2% to 0.4% month on month and from 1.6% to 1.8% year-on-year.

A separate report showed that the nation’s core inflation rate climbed from 1.6% to 2% on a year-on-year basis in April.

Following the data releases the Pound surged against the ‘Aussie’, Euro and US Dollar.
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