The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate lost approximately half a percent overnight after making good gains late last week due to impressive employment data. Australian economic releases will be at the focal point today and tomorrow in determining the next movement of the AUD/GBP exchange rate.
Today the Reserve Bank of Australia (RBA) will announce the Minutes of their April Meeting. The governing body will provide an insight into why rates were kept on hold this month after strong expectation that they would be cut. More importantly, economists and investors will look to interpret the timeframe in which the RBA will proceed with another interest rate cut. If they allude to a short timeframe for an interest rate cut, we can expect the AUD/GBP exchange rate to fall.
The most significant economic release for the AUD/GBP exchange rate will occur tomorrow when the Australian inflation levels are reported on through the Consumer Price Index (CPI) figures. Annualised inflation in Australia is currently sitting at 1.7% and the forecast is that this will decrease further to 1.3%. This is a very interesting forecast, as it leaves the door open for the CPI result to beat expectations and thus, give rise to the AUD/GBP exchange rate. However, even if Australian CPI drastically betters the forecast figure of 1.3%, it is still likely to fall below the RBA’s target range of 2-3%.
An inflation rate of under 2% provides justification for the RBA to again cut rates when they next meet on Tuesday 5th May; a move that will surely push the AUD/GBP exchange rate towards a 6 year low and thus demonstrates the importance that tomorrow’s CPI announcement will have on the AUD/GBP exchange rate in both the short-term and mid-term.
Volatility in the AUD/GBP exchange rate should continue into the evening tomorrow night due to the Bank of England (BoE) Minutes being released. With the UK currently experiencing low inflation, the BoE have all but taken an interest rate hike off the table during 2015. The tone of the wording used will is likely to be the catalyst in moving the AUD/GBP exchange rate.
Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Forecast
The AUD/GBP exchange rate has been enjoying some buoyancy over the last week, however it still appears vulnerable to further declines as an interest rate cut from the RBA continues to loom over the value of the ‘Aussie’ (AUD). There is still the opportunity for the AUD/GBP to jump in the short-term if the Australian CPI data is better than expected.
The uncertainty surrounding the result of the UK general election on May 7th makes it difficult to forecast the impact that the AUD/GBP exchange will experience, however, volatility between the currency pairing can be assured as we grow ever closer to Election Day.