Twin Central Bank Decisions to Shift Pound Australian Dollar (GBP AUD) Exchange Rate Forecast

August 1, 2016 - Written by John Cameron

STORY LINK Twin Central Bank Decisions to Shift Pound Australian Dollar (GBP AUD) Exchange Rate Forecast

BoJ and Fed Rate Decisions Drove Currency Exchange Rates Last Week

Last week’s session in the global currency markets proved to be a tale of two central bank decisions, with both the Bank of Japan (BoJ) and the US Federal Reserve both announcing their latest policy paths. This week’s session is forecast by many analysts to be a repeat performance; our leading data analyst takes a look at the ramifications below…

RBA Announcement Could Trigger Australian Dollar (AUD) Fluctuations

The Reserve Bank of Australia (RBA) leads the way with its latest policy decision, due to be revealed early tomorrow morning UK time. Action is expected from Australia’s lender of the last resort, with the consensus amongst analysts being that the most likely outcome is a 25 basis point cut in interest rates from their current level of 1.75%. The one potential road block to easier money in Australia comes in the form of the continuing upward trajectory of property prices Down Under – the RBA has been consistent in its warnings about the potential emergence of a house price bubble during recent months, making a loosening of policy far from nailed-on. A trimming of rates from the RBA is forecast to send the Pound Sterling Australian Dollar exchange rate back up through the 1.8000 GBP AUD threshold once more.

BoE Easing Expected, Pound Sterling (GBP) to Euro (EUR), US Dollar (USD) Exchange Rate Volatility Forecast

Meanwhile, Sterling-holders will be eyeing Thursday’s Bank of England (BoE) monetary policy decision with some nervousness following last month’s revelation from the UK central bank that the majority of its policymakers believed a cut in Base Rate would be warranted this month. The one caveat added by Britain’s rate-setters in the minutes their July policy decision was that the UK data released during the intervening period would need to be sufficiently poor for an August rate cut to be warranted.

The publication two weeks ago of the worst UK Composite Purchasing Manager Index survey since the height of the Credit Crunch in 2009 should therefore ensure that the BoE does indeed trim the cost of borrowing. Such an outcome is forecast to send the Pound euro exchange rate down to the 3 ½ year low in the 1.1500s which it touched off during the days following the referendum.

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