Pound Sterling GBP Jumps VS Australian Dollar AUD & NZD Exchange Rates on Chinese Monetary Policy Move

Modified: Thursday, 13 August 2015 06:34 BST - Written by Frank Davies

STORY LINK Pound Sterling GBP Jumps VS Australian Dollar AUD & NZD Exchange Rates on Chinese Monetary Policy Move

PBoC Announcement Drives Australian Dollar, New Zealand Dollar Lower Today, GBP Gains VS NZD, AUD

Not for the first time during recent months, the overnight Asian session brought the release of news which caused major ructions in the global currency markets. The announcement from the People’s Bank of China that it was cutting its daily reference rate by 1.9% provoked the price action; the upshot saw China’s local currency – the Yuan – drop by its largest intraday amount since the early part of 1994.

Prospect of Improved Trade Could See Longterm Gains for Commodity Currencies, AUD, CAD, NZD, ZAR

The move was aimed at improving the terms of trade for China’s plentiful exporters, but it will have the dual effect of causing the asking price of foreign imports into China to increase significantly. The upshot is forecast to hit both the Australian and New Zealand economies, which remain heavily dependent upon continuing exports to China, very hard indeed and these expectations caused the Australian Dollar (currency : AUD) and the New Zealand Dollar (currency : NZD) to haemorrhage support in the currency markets. The Pound Sterling Australian Dollar exchange rate has jumped by over 1.5% on the day to trade up to as high as 2.1378 GBP AUD, while the Pound Sterling New Zealand Dollar exchange rate has also gained over 1% on the day, climbing to an intraday peak of 2.3870 GBP NZD.

Conversion Rate Forecast Today: PBoC Decision Could Impact Chinese Monetary Policy and Chinese Yuan (CNY)

Khoon Goh, of the Australia New Zealand Banking Group, predicted earlier that the move from the People’s Bank of China could herald a new approach to monetary policy in the world’s second largest economy.

Goh stated that, ‘the one-off devaluation of the fix and allowing more market-based determination takes us into a new currency regime. It looks like this is the end of the fixing as we know it.’

Analysts forecast that if his words prove to be correct, then the outlook for the Australian and New Zealand Dollars will quickly turn extremely negative. A move higher for both the GBP AUD and GBP NZD exchange rates back towards their post-Lehman Brothers highs could be the ultimate outcome.

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