The Reserve Bank of Australia released their monetary policy statement alongside their interest rate decision today. Interest rates were kept on hold, likely pushing any likely revisit on this back until 2016. The Australian Dollar strengthened with the avoidance of a rate cut as markets were previously anxious that this was a possibility, which in turn caused GBP/AUD to fall. This slide was extended as a result of the surprisingly positive tones in the the report by RBA Governor Glenn Stevens.
Stevens painted a picture of the Australian economy with a decreased likelihood of a rate cut being necessary. Global financial conditions were described as ‘very accommodative’ and he dismissed recent concerns about the potential for housing market bubbles – ‘supervisory measures are helping to contain risks that may arise from the housing market’.
The key part of the report was the description of a ‘further softening of conditions for the Asian region’, which confirmed market perceptions that conditions in China were no longer worsening, which returned some confidence to the AUD following the events of Black Monday and the slowdown in China which began in August.
By stating that the ‘outlook for inflation may afford scope for further easing of policy’ it seems that long term prospects for the Australian economy are much brighter than the forecasts of a few months ago. This is why GBP/AUD fell three cents overnight.
The current rates of exchange are still a gift from the market distortions following the announcement at the end of October of a potential interest rate hike in the USA in December. This allowed GBP/AUD 2.17 to be reached on the markets last week, which is why markets are at 2.14. Without that lucky boost for AUD buyers last week, rates of exchange could have been at 2.11/12.
As such I strongly suggest that anyone with AUD to buy before the end of 2015 should me on [email protected] to discuss a strategy for you transfer and receive a competitive quote in order to maximise your Australian Dollar return. AUD sellers can do the same and we can explore your options on how to ride further movements in your favour.