Sterling dropped sharply today after Mark Carney appeared to have pushed back expectations of an interest rate hike this year. Whilst the BofE did raise its growth forecast for 2014 from 3.4% to 3.5% they highlighted that wage growth was likely to be low, and whilst he wouldn’t give an exact figure on what raise growth would have to be to hike rates, it sounds like any increase will be very gradual and over a long time
Remember it wasn’t that long ago the Bank of England were using the target rate of 7% unemployment to start considering a rate rise so clearly he is keen not to fall into a trap of changing policy on the back of one set of criteria- unemployment figures this morning showed the rate has dropped to 6.4%. Unfortunately earnings actually came in lower than expected, so if people aren’t earning more they may spend less and risk the economy slowing down.
The news has provided a great spike for anyone looking to sell Australian Dollars as it is under the 1.80 pivot point and as I have mentioned before I would sell on the dips and buy on the spikes, as it looks like GBP AUD will continue to see-saw on monetary policy in the UK and Down Under. If you need to make a money transfer and want to get the best exchange rate then feel free to email Colm at [email protected] and I would be happy to explain how our services work.