RBA Keeps Interest Rates on Hold (Tom Holian)

AUD to GBP Higher Ahead of UK Inflation Data

Overnight the Reserve Bank of Australia decided to keep Australian interest rates on hold at 2.5% which saw the Aussie strengthen by over a cent against Sterling during the morning’s trading session. However, the gains were fairly short lived as the UK saw the benefit of positive construction sector news as well as a positive repot by the OECD which saw them raise growth forecasts for the year from 0.8% to 1.5%.

Following the decision the RBA went on to suggest that the AUD will weaken over time naturally as the exchange rate they fear is still too strong having a negative effect on the domestic economy down-under as Australians choose to buy cheaper exports. With the Australian election only now a few days away expect a volatile period for Australian exchange rates to come.

The UK also has its own interest rate decision due on Thursday. Owing to Mark Carney’s recent comments about keeping interest rates on hold until UK unemployment falls below 7% it seems extremely unlikely that there will be any change. However, if Carney decides to talk about Forward Guidance after the meeting expect volatility for GBPAUD exchange rates.

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