Yesterday evening’s results for the Bank stress tests across the 51 major banks in Europe, a widely anticipated event, actually caused confusion as to the value of the Pound against most of its major currency pairings, including buying Australian Dollar rates.
This something I have never seen before.
The results were released at 9pm UK time, which meant that only American markets were still open to trade on the news before the weekend closed, and this was only for an hour or so.
The concentrated activity within such a short space of time caused confusion on the most popularly used website and app in the world to check Australian Dollar and any major currency’s buying rates – XE.com.
The XE app suddenly went haywire and showed GBP/AUD up above 1.78, but this was never the case. Other websites never showed such movements, and the value of the Pound has since deflated back into the lower 1.7’s.
So what actually happened?
The Pound had a mixed bag. Most of the banks performed admirably and reflected the improvement of the government’s attempts ot make sure capital controls are in place to avoid another incident such as the Great Recession.
However, RBS, a bank 73% owned by the UK taxpayer since the Recession, was in the bottom 3 of the 51 banks tested. Apparently 7.5% of its capital would be wiped off the immediate event of a recession, and this seems to be the dominant news, especially given that the likelihood of the UK entering a recession in the next 12 months has increased in the post-Brexit landscape.
This is what contributed to the Pounds value and the fall on buying Australian Dollar rates.
With the Bank of England interest rate decision on Thursday, this mixed bag of data makes it difficult to know if an intervention would be needed – whether in the form of an interest rate cut or a fresh bout of quantitative easing.
The BoE remarks to the news highlighted the consistent performance of the likes of Barclays, HSBC, and Lloyds show a confident air in the UK banking sector. With this relatively stable picture presented, it now seems less likely that a cut may take place next week. There seems to be more breathing room to wait until their next meeting in September before taking drastic action.
Analysts had previously priced in an 80% likelihood of a cut, and current chatter now puts this down to 50-60%. We won’t know the exact figure until official reactions are published on Monday.
With the Australian economy having their own interest rate decision on Tuesday, and with a similar probability of a potential cut, the lack of consensus in the markets will warrant heavy movements next week. If you wish to gamble on the result of these helping your transfer, unfortunately you may need to consult a coin.
To completely remove any risk, Australian Dollar buyers or sellers may wish to move ahead of time to avoid any uncertainty or sudden movements against your favour.
However their are ways to manage your risk during this uncertain period and anyone with a buying or selling Australian Dollar requirement in the short term can email me on [email protected] whilst markets are closed over the weekend to discuss these in more detail.
I have never had an issue beating the rates of exchange offered elsewhere, so a brief conversation could save you thousands on your transfer.