The Pound to Australian Dollar exchange rate saw wide fluctuations last week before ending slightly above its opening levels, with demand for the Australian Dollar dipping in response to comments from Reserve Bank of Australia (RBA) Governor Lowe.
This week investors await further central bank news, with GBP/AUD currently trending around 1.64.
Pound Sterling Recovery Limp
After weeks of poor performance and underwhelming ecostats, the Pound managed to eke out modest gains during the second half of last week.
GBP exchange rates steadied as Britain’s Q2 growth projection met expectations and CBI’s distributive trade and business optimism prints improved.
Monday’s data failed to provide Sterling with any fresh support. June’s mortgage approval report slipped from 65.11k to a 9-month-low of 64.68k while the mortgage lending print rose from £3.9b to £4.1b.
The Bank of England’s (BoE) consumer credit report from June declined from £1500m to £1458m.
Conflicting reports about Britain undergoing a transitionary period following the end of the Brexit process in 2019 have also had an impact on the Pound.
Australian Dollar Struggling on Dovishness from RBA
The Australian Dollar’s long rally appeared to end last week as investors reacted to the latest comments from Reserve Bank of Australia (RBA) Governor Philip Lowe.
Reflecting comments from other RBA officials, Lowe argued that the hawkishness of other major central banks did not mean that the RBA would be making adjustments to interest rates any time soon.
Part of the Australian Dollar’s recent strength had been due to speculation that the RBA is closer to hiking interest rates than cutting them. However, Lowe indicated that the RBA’s tone was still intended to be neutral.
Recent data showed that Australian private sector credit did improve in June, from 5% to 5.4% year-on-year, but investors largely overlooked this report and are looking ahead to tomorrow’s anticipated RBA meeting.
GBP AUD Forecast: What Stance will the RBA Take?
This week has the potential to lead to big GBP/AUD shifts, as both the Bank of England (BoE) and Reserve Bank of Australia (RBA) will be holding policy decisions in the coming days.
The RBA will hold its August policy decision during Tuesday’s Asian session. Any shift in tone from the policy statement could inspire AUD movement, and after the recent market confusion it’s possible the bank could attempt to offer some clarity. Hints that rates will be on hold for the foreseeable future would be ‘Aussie’ negative.
The Bank of England policy decision will be key to Pound movement on Thursday. Investors will be paying attention to how many policymakers vote to hike UK interest rates. With the rate of domestic inflation easing unexpectedly the vote may not be as divided as previously expected.
If less policymakers vote for a rate hike this week, the Pound could tumble.
That being said results of Markit’s July UK PMIs, which will come from Tuesday through Thursday. Britain’s services print could boost the Pound if it impresses later in the week.