The Australian Dollar Pound (AUD GBP) exchange rate crashed this morning after a disappointing Reserve Bank of Australia (RBA) meeting.
Investors hoped that the RBA would take a more hawkish attitude to monetary policy this morning, but that failed to occur.
Instead the RBA adopted a neutral tone in its policy statement and announced that interest rates would remain as they are.
RBA officials stated:
‘Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time’.
Australian Dollar Exchange Rates Struggling
With no sign of monetary policy tightening in the near future, the ‘Aussie’ Dollar dipped significantly against the Pound, despite the Pound having problems of its own.
On the iron ore front things are quite positive as increasing Chinese demand for steel has driven the price of the commodity higher. The Australian Dollar will, however, take time to recover from its recent dovish dip, regardless of the recent positive commodity trends.
Australian retail sales did, however, demonstrate more growth than forecast, with the May figure printing at 0.6%, higher than the 0.2% expected but lower than 1.0% for the previous month.
Negative UK Construction PMI Hurts Sterling (GBP)
Sterling dipped slightly following the release of today’s Markit/CIPS UK construction PMI, which printed at 54.8, missing expectations of 55 and coming in lower than the previous month’s print of 56. Sterling pared even more of its recent gains as a result, crashing to a six-day low.
Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement and Supply elaborated:
‘The construction sector’s confidence took a knock this month as optimism fell to its lowest reading in 2017 and clients became more restrained in placing new orders. Respondents cited continuing uncertainty in the run up to the election and Brexit negotiations for the hesitancy. But, the housing sector continued to have the most get-up-and-go with the second fastest rise since December 2015, leaving the other sectors lagging behind’.
The negative figure was primarily as a consequence of both low growth in new orders and employment, and barely any business optimism for 2017 – a sign of risk aversion amongst clients responding to the currently unpredictable economic and political landscape.
AUD GBP Forecast: Trade Balance Figure Due Thursday
The second half of the week will see the release of significant data for both the UK and Australia. Australia’s trade balance is due Thursday and it is currently forecast to grow from a previous surplus of A$555m to A$1100m.
In regards to the UK, the Markit Services and Composite PMI’s will be released, with the composite expected to slide from54.4 to 53.9. In addition, industrial and manufacturing production figures and house price data will be published on Friday.
Should UK manufacturing and industrial production demonstrate growth, as they are predicted to, Sterling could rally, putting even more distance between the currencies.
Current AUD GBP Interbank Exchange Rates
At the time of writing, the Australian Dollar Pound Sterling (AUD GBP) exchange rate is trading at 0.5880. Conversely the Pound Sterling Australian Dollar (GBP AUD) exchange rate is trading at 1.6995.