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Pound Sterling Australian Dollar Exchange Rate Forecast Improves GBP AUD Record Highs Lost

April 27, 2016 - Written by John Cameron

While the Pound managed to triumph against the Australian Dollar recently, it has since lost out due to the Fed's interest rate freeze boosting the appeal of the AUD.

The Pound has been a solid contender against the AUD across the course of the day, thanks to a persistent negative reaction to the Australian inflation rate results for the first quarter.

GBP/AUD Exchange Rate Forecast to Rally as Australian Inflation Missed Estimates

Support for the Australian Dollar (currency : AUD) has slumped during the first half of today’s European equities session. The trigger for this move against the ‘Dollar from Down Under’ came in the form of the latest Australian Consumer Prices Index, published overnight, which revealed that local prices had fallen by 0.2% during the first three months of this year.

Analysts had been expecting the quarterly Australian CPI figure to show an increase of prices of some 0.2%, so the result came a quite a shock to Aussie-holders.

The Pound Sterling Australian Dollar exchange rate shot Northwards in the wake of the publication, sending the pair up to a near-term high of 1.9228 a short time ago. Analysts believe that the Reserve Bank of Australia (RBA) may now countenance another interest rate cut in the next few days – such an outcome would be certain to send the GBP AUD exchange rate soaring back above the two to one threshold.

RBA Predicted to Cut Rates amid Deflation Fears

Paul Dales of Capital Economics, speaking earlier, placed the release in context, stating that, ‘we have been warning for some time that below target underlying inflation would prompt the Reserve Bank of Australia to cut rates again and the extremely weak inflation data for the first quarter means rates may even be reduced to 1.75 per cent at next week’s policy meeting.’

Elsewhere, today’s gains for the Pound Aussie exchange rate were added to by the latest UK Gross Domestic Product data, published earlier.

The official numbers showed a year-on-year rate of domestic economic growth of a slightly higher than anticipated pace of 2.1% during the first quarter of 2016. This was exactly the same as the counterpart result for Q4, 2015, suggesting that the apparent stalling of Britain’s economic recovery over the past six months may now be bottoming out.

The outlook for the UK tender is now neutral to positive.

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