April 2, 2019 - Written by John Cameron
STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Rises as RBA Holds Interest Rate
GBP/AUD Exchange Rate Rises as RBA Shows Bias towards ‘Formal Easing’
The Pound Australian Dollar (GBP/AUD) exchange rate edged higher today and is currently trading around AU$1.8440 on the inter-bank market.
The Australian Dollar (AUD) fell against the Pound (GBP) today following the Reserve Bank of Australia’s (RBA) interest rate decision, which remained unchanged at 1.5%.
However, in the final paragraph of its monthly monetary report there was a hint of dovishness, which has weighed on investors’ confidence in the ‘Aussie’ today.
The report concluded:
‘The low level of interest rates is continuing to support the Australian economy. [But the] Board will continue to monitor developments and set monetary policy to support sustainable growth in the economy and achieve the inflation target over time.’
Sally Auld, a Chief Economist at JP Morgan, interpreted this as indication that the bank would ‘step in the direction of a formal easing bias,’ which has left some AUD traders feeling jittery.
The Australian government has also announced tax cuts ahead of next month’s elections, buoying confidence in a possible flourishing of the economy.
GBP/AUD Exchange Rate Edges Higher despite No-Deal Fears
The Pound (GBP) has struggled today following last night’s ‘indicative votes’, which offered alternatives to Prime Minister Theresa May’s Brexit deal, however – for the second time – MPs rejected all of possible amendments.
Theresa May has held 5 hours of emergency talks today, and hopes, however, are rising on the possibility of an extension to Article 50 – just 10 days before the UK is due to leave the EU on 12 April.
Conservative MP Sir Oliver Letwin, who supports MP Yvette Cooper’s bill to extend Article 50, said:
‘This is a last-ditch attempt to prevent our country being exposed to the risks inherent in a no deal exit. We realise this is difficult. But it is definitely worth trying.’
Today also saw the publication of the UK Markit Construction PMI figures for March, which slid further into contraction at 49.7.
AUD/GBP Exchange Rate Falls on Concerns of Global Recession
Today also saw the publication of the Australian building permits figures for February, which soared to 19.1%.
However many analysts expect a reversal of this next month, with an economist at the National Australia Bank, Kaixin Owyong, saying ‘approvals data [is] very volatile.’
Concerns are rising over the US-China trade talks today, with Moody’s warning of a global recession if a deal is not forthcoming. And with the Australian economy closely tied to China’s, this is causing many ‘Aussie’ traders to remain cautious.
Mark Zandi, a Chief Economist at Moody’s Analytics, commented:
‘Businesses are really on edge and I think it’s because of this trade war. And if it’s not settled in the next couple (to) three months, I think a global recession is highly likely.’
GBP/AUD Forecast: Sterling Could Rise on Brexit Extension News
Tomorrow will see the publication of the Australian trade balance figures for February, and with any signs of improvement this could provide some uplift for the ‘Aussie’.
These will be followed by the release of the Chinese Caixin Services PMI figures for March.
Sterling traders, meanwhile, will be awaiting tomorrow’s printing of the UK Markit Services PMI figures for March, which are expected to come in at 50.9.
The GBP/AUD exchange rate will, however, remain directed by Brexit developments, and with any signs of a possible extension to Article 50 forthcoming from Downing Street, this could benefit the Pound as fears of a no-deal recede.
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