The Pound began what could be a long recovery period against the ‘Aussie’ yesterday after a unanimous decision from the Bank of England (BoE) pushed the pair down from an over one-year high.
Positive Employment Data Keeps ‘Aussie’ Holding on Despite Soaring Sterling
In a move that has seen the Pound recover weaknesses across the board against many major rivals, the Bank of England announced their key rate decision yesterday. The AUD/GBP exchange rate currently trades steadily in the range of 0.5273 having barely shifted in the last few hours.
The impact of the BoE’s announcement comes from the unanimous mentality of policymakers, with nine out of nine policymakers deciding against an interest rate cut. Many analysts and investors had fears that the central bank would hint towards a rate cut sometime this year, a sentiment that would thoroughly shake the already EU referendum-weakened Pound.
Instead, the BoE’s mentality yesterday has even been described by some as surprisingly hawkish, especially following a dovish UK budget earlier in the week, global economic issues and Britain’s ongoing domestic concerns. The uncertainty of UK’s economic situation after June’s EU vote has influenced policymakers to abstain on action for now and let the Pound rest.
However, this isn’t to say the Australian Dollar has considerably weakened either. After the pair hit a high of 0.5355 yesterday – the best level since January of 2015 – the Pound was only able to drag the ‘Aussie’ down to around 0.5271 before the pair began settling.
Positive Australian employment data is likely to have played a considerable part in bolstering the Australian Dollar’s defences. While analysts expected around 10,000 new jobs to be created only around 300 were, though this is still a vast improvement over January’s loss of over 7,000 jobs.
Even more positive news comes from unemployment data registering at only 5.8%, down from January’s unemployment figure of 6.0% as well as estimates that the 6.0% figure would remain. While less new jobs were made than expected, the unemployment rate dropped regardless, showing promising growth in Australian employment overall.
Federal Reserve’s Key Rate Announcements Spark New Enthusiasm for Risky Currencies
Another vital reason for the Australian Dollar holding its ground against an empowered Pound is a continued trail of investors leaving the US Dollar (USD) after the Federal Reserve halved plans to hike up the US interest rate this year.
Upset investors fled to the riskier currencies of the commodity bloc after December’s hawkish forecast to increase the key interest rate from the newly set 0.50% as many as four more times throughout 2016 turned out to be overly optimistic.
The Fed announced this week that it was more likely for the rate to only be hiked twice more this year, citing global economic turmoil such as the ongoing oil commodity crisis and difficulty within the European Union.
Risk sentiment soared following disappointed investors, as they hungered for the more eventful movements of commodity currencies. The ‘Aussie’, already experiencing a bullish run over the last two weeks, has benefitted with further lasting strength as a result.
Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Forecast: Quiet Week Ahead for ‘Aussie’
The Australian Dollar seems likely to be influenced further by global market sentiment in the coming week with a lack of vital Australian data set for release besides Tuesday’s house prices index reports.
The pair currently moves steadily with both the ‘Aussie’ and Sterling experiencing periods of strength from recent news. It is uncertain if this strength for both will continue as analysts predict Australian growth could soon begin to slow down and ‘Brexit’ fears are certain to rear their ugly head again once Britain settles from this week’s Budget and Bank of England announcements.
It is also likely that as a ‘safe-haven’, investors will eventually settle on the US Dollar despite disappointment and begin to return to it, though while risk-sentiment is high AUD seems likely to enjoy continued strength as a currently favourable currency of the commodity bloc.
Next week’s most vital data for the AUD/GBP pair seems set to be Britain’s upcoming CPI data and other price index releases, with a slew of them set for release on Tuesday. Coming quite early in the week, positive inflation data could well see the Pound continuing the growth begun by the BoE’s decisions, while negative releases could instead see its strength coming to an abrupt end.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is currently trending in the region of 0.5273 while the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate trends in the region of 1.8958.