The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate remained buoyant into the middle of Tuesday’s European session despite a rise in headline UK inflation, after the Reserve Bank of Australia (RBA) signalled stability on the topic of interest rates.
The RBA recently surprised markets by cutting rates by 25 basis points, down to 2.25%.
The minutes read: ‘On the basis of their assessment of current conditions and taking into account the revised forecasts, the Board judged that a further reduction in the cash rate would be appropriate to provide additional support to demand.’
However, many economists suggest that although the RBA stated they weren’t planning on another rate cut in March, the central bank is likely to slash rates again.
Economist Felicity Emmett commented on the situation, saying: ‘Given the RBA’s historical tendency towards consecutive moves in the early part of a new cycle and its own research which suggests that the impact of one 25 basis point rate cut on the economy is negligible.’
‘With the cash rate of two percent or less factored into the RBA’s forecasts, which have growth remaining below trend for at least another year, we expect that there is little reason for the RBA to wait and watch the data over coming months and continue to expect a follow-up move in March.’
Meanwhile, the Pound Sterling exchange rate had an interesting day after UK inflation figures emerged. The Core UK Consumer Price Index (CPI) managed to rise from 1.3% to 1.4% rather than fall to 1.2% as economists had forecast.
However, the non-core measure fell further than predictions from 0.5% to 0.3%.
Labour shadow Treasury minister Cathy Jamieson commented: ‘Inflation is falling around the world because global oil prices have plummeted. But in Britain, wages continue to be sluggish and working people are £1,600 a year worse off under this government. A few months of falling world oil prices won’t solve the deep-seated problems in our economy.’
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate could fluctuate on Wednesday with the release of Australia’s Conference Board Leading Index and Westpac Leading Index.
The UK will publish highly influential Employment Change and Unemployment Rate stats as well as the Bank of England (BoE) meeting minutes.
In addition, any changes in commodity prices such as iron ore and gold could influence the ‘Aussie’.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is trading at 0.5085. The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trending in the region of 1.9675.