GBP/AUD rates fell away from the recent 7 year highs dramatically during trading today, following the overnight announcement (UK time) of the decision to keep interest rates at their current levels.
Markets were expecting a move to cut the base level of 2% interest in the Australian economy, as a pre-emptive measure to shield their economy from the harmful affects of an economic slowdown in China and a collapse in commodity prices.
This expectation that interest would be cut was what had driven rates up to highs of 2.14 we have enjoyed over recent weeks. Now GBP/EUR rates have fallen over 3 cents following the Reserve Bank of Australia’s decision not to act, with markets realising they were wrong to make such an assumption.
Additional data released overnight also highlighted positive developments in the Australian economy. Retail sales figures for July came in at 0.7%. These are normally quiet months for the Australian retail sector as their winter makes tourism a less lucrative industry. Such an increase, particularly when only a small rise of 0.2% was expected, certainly contributed to GBP/AUD rates testing the 2.10 boundary. Such spending habits shows significant domestic consumer confidence, which in turn inspires confidence in the Australian Dollar.
In the early hours of Thursday morning in the UK, employment figures will be released for the Australian economy. This has been an improving figure over the past few months. The increase in retail sales may signal that a few more of the unemployed have been soaked up into the labour market and have money to spend. As such I would not be surprised to see further AUD strength as we progress into the first week of August.
Those with AUD to buy and were holding out for highest rates have lost out unfortunately. It is very difficult to buy at the high of the market, particularly when that high is purely based on market psychology rather than concrete economic data. I expect rates to fall towards the end of the week and settle around 2.07/8.
These rates are nothing to sniff at and you are still buying very close to 7 year highs for GBP/AUD rates. Email me overnight to discuss how to maximise the value of your Sterling before data releases move against your favour further.
Even if your requirements are not until later in the year, these favourable buying rates can be pegged at no additional cost. [email protected]