The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate rallied by around 1.00% during Monday’s European session.
After a weeklong hiatus, the People’s Bank of China (PBoC) returned to markets making its intentions known straight away with the highest Yuan fixing in three months. This caused trader risk appetite to improve significantly, allowing the risk-correlated ‘Aussie’ (AUD) to rally versus most of its major peers. Although US Dollar strength has limited the Australian Dollar’s appreciation, ongoing concerns that the Federal Reserve will delay a cash rate hike until 2017 should support demand for the ‘Aussie’ in the long term.
‘In the near term, the stronger fixing and Zhou’s comments reflect the PBOC’s consistent view of stabilizing the Yuan,’ said Ken Cheung, a Hong Kong-based strategist at Mizuho Bank Ltd. ‘Containing Yuan depreciation expectations and capital outflows remain top-priority tasks. Mild depreciation could be allowed, but that would be done only after stabilizing depreciation expectations.’
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trending in the region of 0.4946 during Monday’s European session.
British economic data printed positively on Monday with Rightmove House Prices advancing on both an annual and monthly basis in February. However, this failed to support demand for the UK Pound which softened versus most of its major peers. The depreciation can be linked to political uncertainty with the forthcoming EU referendum weighing heavily on investor confidence. The British Prime Minister’s attempts to reshape the current relationship between the UK and the EU has not enacted GBP gains, as yet, with most traders not expecting all Eurozone countries to agree to the proposed reforms.
Speaking in defence of leaving the European Union, London Mayor Boris Johnson stated; ‘The salient point is this: London is now doing unbelievably well,’ he said on 14 February. ‘People thinking about Britain in Europe, Britain out of Europe should recognise that a lot of the investment we attract now is from places outside the EU.’ He continued: ‘We export increasingly outside the EU. There is no reason to be afraid,’ he said, boosting the Leave campaign. On whether London would flourish if the UK remained in the EU, he said: ‘London is by far and away the economic powerhouse of the whole of Europe. It is the commercial, the financial, the cultural, the tech centre of the whole community, it is 25% of UK GDP, it will flourish in or out.’
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate dropped to a low of 0.4895 during Monday’s European session.
Given the absence of further domestic data and the extent of the appreciation, the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is likely to hold gains for the remainder of Monday’s European session. However, the Australasian session is likely to see volatility with the publication of Reserve Bank of Australia (RBA) meeting minutes from the most recent monetary policy meeting. As we progress into Tuesday’s European session the AUD/GBP conversion rate will likely see heightened movement in response to the UK’s Consumer Price Index. The data will be hugely significant because weak inflation has been one of the major contributors to the Monetary Policy Committee’s (MPC) decision to hold accommodative policy for such a long time.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate reached a high of 0.4949 during Monday’s European session.
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