Pound Tumbles Against ?Aussie? (GBP/AUD) as Central Bank Stability Bolsters Australian Dollar

Modified: Tuesday, 7 April 2015 21:59 BST - Written by Ben Hughes

STORY LINK Pound Tumbles Against ?Aussie? (GBP/AUD) as Central Bank Stability Bolsters Australian Dollar

The Pound fell against the Australian Dollar on Tuesday after the Australian central bank announcement offered the Oceanic currency some support. The ‘Aussie’ jumped dramatically against a varied host of other majors when the Reserve Bank of Australia chose not to cut interest rates as so many economists had expected. The move was accompanied with a dovish statement from the central bank which suggested that it would be keeping a close eye on how the current level of monetary policy was supporting the economy in future meetings. The statement read: ‘Moderate growth in the global economy is expected in 2015, with the US economy continuing to strengthen, even as China’s growth slows a little from last year’s outcome. Financial conditions are very accommodative globally, with long-term borrowing rates for several major sovereigns at all-time lows. Financing costs for creditworthy borrowers remain remarkably low.’

However, despite Tuesday’s decision to keep rates on hold, the prospect of unstable borrowing costs still looms over the Australian economy. The central bank statement continued: ‘At today’s meeting, the Board judged that it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will continue to assess the case for such action at forthcoming meetings.’ As the RBA has left things rather up in the air, it’s fair to say that coming months could be fraught with ‘Aussie’ fluctuations as speculation mounts on the back of unfavourable data releases or any shows of poor economic performance.

If it looks as if the central bank could be on the verge of cutting rates due to economic data, the Australian Dollar could sink. Meanwhile, the Pound remained weaker as ‘Aussie’ sentiment dominated the market despite a highly favourable rise in UK service sector growth. The Services Purchasing Managers Index hit 58.9 in March from February’s 56.7. Economists had expected a much smaller increase to 57.0. Economist Chris Williamson commented: ‘The UK economy moved up a gear in March, recording the strongest pace of growth since last August.’ Additionally, the Composite Index also climbed from 56.7 to 58.8 and added fuel to arguments against a slowdown in the UK economy. Data has remained relatively consistent of late after massive improvement last year, therefore the UK still stands a chance at being one of the first economy’s to witness an increase in interest rates out of the Group of Seven since the onset of the global financial crisis.

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TAGS: Australian Dollar Forecasts Currency Predictions Pound Aus Forecasts