The RBA minutes came out a few hours ago and during the discussion it became clear that another interest rate cut is possible. However, as the rate cut does not appear imminent the Australian Dollar exchange rate strengthened against Sterling during this morning’s trading session so far dropping below 1.68. It also means that a cut next month is also unlikely which is possibly why the Aussie strengthened.
Adopting a similar stance to Mark Carney’s Forward Guidance whereby he provides an insight into policy in the future the RBA are now giving clues as to future policy. Many analysts expect an interest rate cut early next year but for the time being interest rate policy down-under is likely to remain the same for the rest of the year. The Consumer Price Index figures will be one of the most important data sets over the next few months as an increase will mean that the RBA may be forced into cutting rates sooner than expected.
We are now entering day 15 of the US government shutdown but it appears as though politicians are coming close to a resolution. With Columbus Day in the US being celebrated yesterday positive signs have come out of the Senate. The debt ceiling will need to be resolved by Thursday with the intention to extend the ceiling date to February 7th 2014. Harry Reid (US Senate) said that he was ‘very optimistic’ that a deal will be reached very soon and bring an end to the government shutdown. This helped the riskier currencies including the Australian Dollar to improve against both the Pound and the Euro.
Coming out shortly for the UK is Consumer Price Index so expect volatility for GBPAUD exchange rates later this morning.
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