The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trending within a limited range during Thursday’s European session.
Despite the fact that the US Dollar is holding a weak position versus its major peers and the Shanghai Composite Index ended the Asian session 3% higher, the Australian Dollar declined versus its most traded currency rivals.
The depreciation is mostly the result of falling precious metal prices after the recent surge saw traders taking profits. In particular, gold prices declined amid speculation that Beijing’s intervention in China’s equity markets will not have the long-term impact of promoting stability.
‘Following the steep price rises of recent days, precious metals are seeing profit-taking this morning which is weighing significantly on prices,’ Commerzbank analysts said in a note. ‘The return of China could see increased volatility in commodity markets,’ added ANZ analysts.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trending in the region of 0.4701 during Thursday’s European session.
After the Bank of England (BoE) opted to hold the cash rate at the record low 0.5%, the Pound softened versus its major peers.
The interest rate decision itself wasn’t the cause of the depreciation given that most analysts expected the central bank to hold. The downtrend was the result of dovish minutes which revealed that just one policymaker voted for an immediate hike. In accordance with the minutes, the other members highlighted the absence of inflationary pressure as the main reason for delaying a rate hike.
The minutes also suggested that policymakers were less confident that inflation will pick-up at the turn of the year.
‘We would expect some Sterling weakness in the short term, but the effects of the minutes should be limited,’ said Richard Cochinos, currency strategist at Citi. ‘Sterling will be increasingly sensitive to inflation surprises, but we retain our medium term view of Euro heading lower against the Pound in October.’
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate dropped to a low of 0.5674 during Thursday’s European session.
Although the forthcoming publication of the Federal Open Market Committee (FOMC) minutes is unlikely to be hugely impactful, given that the meeting was held prior to a run of poor US data releases, any significant hawkishness may still weigh on demand for the Australian Dollar.
Friday is likely to see significant AUD/GBP volatility with Australian Home Loans and Investment Lending due to be released and UK Trade Balance data due for publication.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate climbed to a high of 0.4710 during Thursday’s European session.
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