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Gains Unlikely for GBP AUD Exchange Rate if Forecasts are Accurate

May 3, 2016 - Written by John Cameron

The near-future looks dim for the Pound Sterling, given that the latest predictions are for positive Australian data and negative UK printings.

Australian Dollar (AUD) Exchange Rates Dived following RBA Rate Cut

The Australian Dollar (currency : AUD) has come in for sustained selling pressure in the global currency markets today. The shift out of Aussie-denominated assets was driven by the Reserve Bank of Australia’s decision to cut its headline interest rate to a fresh record low of 1.75% last night.

The move by Australia’s central bank was not wholly unexpected, but equally it was by no means fully factored-in by investors. Last week’s significantly lower than anticipated Australian Consumer Price Index data gave Aussie policymakers a ready-made excuse for trimming the local cost of borrowing and they jumped at the opportunity.

RBA Governor Glenn Stevens explained that, ‘inflation has been quite low for some time and recent data were unexpectedly low.’ He went on to assert that, ‘while the quarterly data contain some temporary factors, these results, together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.’

GBP/AUD Exchange Rate Reached an Intraday High of 1.948 Today

The Pound Australian Dollar spiked to an intraday high of 1.9448 GBP AUD as a consequence of the RBA’s action.

The gains for the pair would have been of a greater magnitude were it not for the latest UK European Referendum Poll of Polls which showed that the ‘Remain’ campaign’s lead of a week ago had evaporated.

The result, which aggregated individual polls from ICM, ORB, Survation, YouGov and Opinium conducted from 22/04/2016 to 29/04/2016.

Analysts accept that a vote for the UK to remain in the ‘Remain’ as part of the European Union will provide Sterling with a boost, while a vote to ‘Leave’ will knock up to 20% off the value of the Pound, according to leading investment bank Goldman Sachs.

Another drag on the Aussie today has been the downward move in global commodities prices; the Bloomberg Commodity Index closed at a near-term peak of 85.5205 on Friday but, at the time of writing, had fallen by 1.25% to 84.4638. FX insiders forecast that there could be further gains to come for the GBP AUD exchange rate in the short to medium term.

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