The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate rallied by around 0.89% towards the end of Tuesday’s European session.
Despite the fact that the Reserve Bank of Australia (RBA) cut the benchmark interest rate to a record-low 2.0% on Tuesday, the ‘Aussie’ (AUD) advanced versus nearly all of its most traded currency competitors.
The appreciation has come in response to speculation that the central bank will not cut rates further, and that the next policy alteration will be a positive one. Even disappointing domestic data wasn’t enough to overturn the ‘Aussie’ uptrend.
The Pound, meanwhile, ticked higher versus the majority of its most traded currency rivals despite the fact that constriction output missed estimates. The gains can be linked to a report from the European Commission which forecasted improved Eurozone growth despite ongoing difficulties in Greece. As the UK’s most prominent trade partner, better growth in Europe is beneficial for Britain.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is currently trending in the region of 0.5228.
Although under usual circumstances a central bank cutting the cash rate would cause the domestic currency to decline, the Australian Dollar advanced on Tuesday. This is because analysts expect the easing cycle to end, and the next alteration will be a hike.
‘The RBA has done the right thing,’ said economist Shane Oliver from AMP Capital. ‘Sure, surging Sydney house prices are a concern but interest rates need to be set for the national ‘average’, not just one city,’ he said. ‘And the ‘average’ is telling us Australia needs lower interest rates: growth is subpar, the business investment outlook is poor, national income is getting hit hard by the falling iron ore price and house price gains outside of Sydney are soft.’
‘The Australian Dollar is definitely trading as though investors think the RBA has drawn the line at 2 percent,’ said Sean Callow, a strategist at Westpac Banking Corp. ‘The statement reinforces that outlook, with the more upbeat commentary on household demand and employment.’
‘We think the easing cycle ends today,’ said Stephen Walters, Sydney-based chief economist at JPMorgan Chase & Co. ‘On our rate forecasts, the bank’s next rate move likely will be a hike, but not until the second half of 2016, which seems a very long way off.’
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate has fallen to a low of 0.5154.
British economic data produced less-than-ideal results on Tuesday, but the data had minimal impact on Sterling movement. The Markit/CIPS UK Construction PMI came in at 54.2 in April, missing the median market forecast of 57.4.
Tim Moore, Senior Economist at Markit said; ‘April’s survey highlights another growth slowdown across the UK construction sector, with new work expanding at the weakest pace for almost two years. The uncertain general election outcome appears to have put some grit in the wheels of decision making. Construction firms widely noted delays with clients’ budget setting and a reduced propensity to commit to new projects.’
The Sterling advance is as a result of a relatively positive European Commission report as they predict that the European Central Bank’s (ECB) quantitative easing program will overshadow downward pressures caused by geopolitics in Greece. ‘The European economy is enjoying its brightest spring in several years, with the upturn supported by both external factors and policy measures that are beginning to bear fruit,’ said Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs.
Given the complete absence of domestic data to curb the trend, the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is likely to hold gains for the remainder of Tuesday’s European session.
Wednesday’s Australasian session could see heightened AUD/GBP volatility with several Australian data publications due for release. In addition, data out of China is likely to impact upon ‘Aussie’ movement.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate climbed to a high of 0.5236.
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