Early this morning the RBA released it latest minutes in which it suggested a neutral stance in regards to monetary policy, giving little clue as to when their next move with interest rates might be. It said low interest rates were working to support demand but expressed concern about whether that would be enough to offset economic challenges. As a result the Aussie fell against the pound this morning, a move that was compounded following the release of UK inflation at 09:30
UK inflation figures were stronger than expected and lead to a drive in the pounds favour as a common tool to counteract rising inflation is to raise interest rates. As the inflation level gets close to the Bank of England’s target level of 2% and beyond, the prospect of rising interest rates becomes more likely and hence a push in favour of sterling. The drive through 1.83 gives AUD buyers the best levels in nearly four months.
This recent pressure on the dollar may well continue, with UK unemployment figures tomorrow forecast to fall from 6.6% to 6.5% the pound could be set for another good showing with the market testing the 1.84 level.
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