The past week has seen the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate fluctuate between 2.0183 and 2.0554.
Bank of England (BoE) Dovishness Crippled Sterling Last Week
By far the most notable Pound-moving event last week was the Bank of England’s Super Thursday of announcements. Amid a storm of discontent over corporation tax and the ongoing UK referendum renegotiations, the BoE’s interest rate decision on Thursday put the final nail in the coffin for any hopes of a GBP rally.
The initial expectation was that policymakers would repeat the then-routine 8-1 vote against a rate hike, with Ian McCafferty representing the sole hawk of the bunch. As it stood, however, McCafferty finally changed his tune and made it a unanimous vote against a UK rate hike occurring for the foreseeable future. The BoE’s inflation report was also less than cheery and the news caused some economists to push their rate hike expectations far ahead to 2018.
Initial AUD Slide Following NFP Decision Fails to Last
Although the GBP/AUD exchange rate rallied at the close of last week as the US Non-Farm Payrolls report supported the case in favour of the Federal Reserve increasing interest rates in March, the ‘Aussie’ wasn’t held down for long. With no impactful data out today, the UK has been otherwise affected by a fairly bleak assessment from the Institute of Fiscal Studies, which has estimated that unless circumstances improve dramatically, there is a minimum 25% chance that further UK tax rises, cuts or borrowing will need to take place in the future. This is based off of last year’s budget target put forward by George Osborne; the percentage outlined by the IFS was based off of the inflexibility of the target.
‘Aussie’ Interest Rate Freeze Countered by Chinese New Year This Week
Last week’s most notable Australian economic announcement came in the form of the Reserve Bank of Australia (RBA) Interest Rate Decision, which resulted in a freeze at 2% as expected. While expectations are that there will be at least two rate cuts in 2016, the news did at least give investors a month’s worth of breathing room.
Today, the ‘Aussie’ has returned to bullish form and with no high-impact domestic data out, the underlying cause is thought to be the arrival of Chinese New Year – an event that has effectively prevented news from China having much impact on AUD trading for a short time.
This Week’s GBP/AUD Exchange Rate Forecast
This week, Pound Sterling/Australian Dollar exchange rate movement may occur as a result of tomorrow’s UK Trade Balance results and Australian Westpac Consumer Confidence result, Wednesday’s UK Industrial and Manufacturing Production outcomes and Thursday’s Australian Consumer Inflation Expectation for February.
No predictions have been made for the outcomes of the Australian reports, but the UK has a mixed result forecast for both the trade balance and the production results.
Heads Up
Summary of major upcoming data releases that we think may move the market.