Pound Australian dollar exchange rate subdued as RBA dismisses rate hike
The Pound Australian dollar (GBP/AUD) exchange rate is trading without a clear direction this morning after the release of the Reserve Bank of Australia’s (RBA) latest meeting minutes.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8993, virtually unchanged from this morning’s opening rate.
Australian dollar (AUD) subdued following RBA minutes
The Australian dollar is largely muted this morning after the publication of the RBA’s latest monetary policy meeting minutes.
The minutes lent more dovish than anticipated, as the central bank reiterated its requirement for further consolidating data. The largely tepid minutes also saw policymakers express concern over Australia’s economic trajectory, which further dampened hopes of a summer interest rate hike.
Additionally, the central bank spoke on the impacts of potential shifts in the AU labour market. Policymakers noted that any sharp increases in domestic unemployment could further prompt the RBA to keep rates unchanged for a prolonged period of time.
The bank said:
‘Members also affirmed their assessment that it was still possible to achieve the Board’s strategy of returning inflation to target in a reasonable timeframe without moving away significantly from full employment, even though this ‘narrow path’ was becoming narrower.’
The lukewarm remarks left AUD largely rudderless, indicating no notable changes to upcoming interest rate decisions as the RBA seeks to quell an ongoing spell of economic uncertainty.
Pound (GBP) buoyed by improved growth forecasts
The pound (GBP) is being underpinned by improved growth expectations this morning amid a lack of fresh macroeconomic releases.
With data in short supply, audit giant KMPG’s latest global growth forecast may lend GBP some modest support this morning.
The report suggests that falling inflation alongside tailwinds to consumption should boost modest growth in the UK through the remainder of the year.
Yael Selfin, Chief Economist at KPMG UK, commented on the report:
‘While households have benefitted from a pickup in real earnings and a relatively stable labour market, business investment could also return as an engine of growth. Political uncertainty will now resolve sooner with a summer election and a potential fiscal event in the autumn, setting out the new government’s economic agenda. This could be aided by gradual cuts in interest rates, which look likely despite a small rise in inflation above its target expected later this year.’
Meanwhile, UK election jitters may limit any notable movement in GBP ahead of Thursday’s vote.
Pound Australian dollar exchange rate forecast: PMIs in focus
Looking ahead, Australia’s latest retail sales data is due out tomorrow.
Also due for release tomorrow is China’s latest Caixin services PMI. Economists expect to see a marginal slowdown in China’s services sector, with the index due to print at 53.4 in June, compared to 54 in the previous month. Due to the Australian dollar’s status as a proxy currency for the Chinese economy, a robust reading could lend AUD some support.
Looking to the UK, a lack of high impact releases may bring the UK’s finalised services PMI into focus as well. Confirmation that the services sector contracted last month may weigh on Sterling.