The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trending within a tight range towards the end of Tuesday’s European session.
After minutes from the most recent Reserve Bank of Australia (RBA) policy meeting indicated that policymakers were willing to use additional stimulus measures to combat the Sydney housing bubble, the ‘Aussie’ (AUD) softened versus many of its major peers. Aiding the declination was dampened market sentiment as geopolitical tensions in Europe are close to breaking point.
The Pound, meanwhile, edged lower versus many of its major peers with a complete absence of domestic data to provoke changes. The general depreciation can be attributed to political uncertainties as we draw closer to the general election.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is currently trending in the region of 0.5175.
With Greece struggling to produce acceptable reforms to Eurozone officials, creditors expecting the cash-strapped nation to default, Athens calling for local governments to give spare cash to the central bank and with Russian-based gas provider Gazprom looking to seal a deal with Greece to use the country as an access point to Europe; market sentiment dampened considerably.
As a risk-correlated currency, the Australian Dollar softened in response to the cool trader risk-appetite.
Additional ‘Aussie’ losses can be connected to minutes from the most recent RBA policy meeting. The minutes highlighted continued difficulties in the housing sector and the potential to stimulate recovery by loosening policy.
‘Officials also may have been influenced by early signs that accommodative policy was working, although the reaction of borrowers and savers to lower interest rates is ‘unusually uncertain’,’ said JP Morgan’s Australian economist Stephen Walters. ‘All the while, there still is anxiousness about the exuberance in Sydney’s housing market, where home auction clearance rates are at record highs, and prices are rising at close to 3 per cent per month!’
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate dropped to a low of 0.5158 today.
As explained above, the forthcoming general election is weighing heavily on investor confidence. Speculation that the election will be so closely fought that there will be a coalition or hung parliament is further compounding political uncertainties.
A complete absence of British economic data has seen the downtrend continue as traders fear a dramatic policy overhaul once the election concludes. The potential for a British exit from the European Union, for example, is heightened considerably if either the Conservatives or UKIP gain power, and even more so if they end up joining forces.
Given the lack of influential domestic data to provoke changes, the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is likely to hold steady for the remainder of Tuesday’s European session.
Wednesday’s Australasian session will see heightened AUD/GBP volatility with several important Australian economic data publications due for release. Of particular influence over ‘Aussie’ movement will be the Consumer Prices Index for the first-quarter. Bank of England (BoE) minutes from the most recent policy meeting will also have an impact on the pairing.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate climbed to a high of 0.5200 today.
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