BOE Rate hike based on misleading data
After GBP/AUD breached 1.70 which is considered to be a resistance point many hoped for further Sterling gains. Unfortunately this window of opportunity was small. Mark Carney the governor of the Bank of England (BOE) stated there is the possibility of a UK interest hike as early as November. I am of the opinion there is not enough justification for a hike as inflation is moving at a rapid pace and average wage growth is actually declining. He has used unemployment levels a positive for the economy, being touted as the best levels since the 70s, but there has only recently been the introduction of zero hour contracts.
UK politics anchoring the pound
Although we have seen gains for the Aussie of late I am of the opinion this is more down to Sterling weakness than Australian Dollar strength. After the debacle that was Theresa May’s speech at the conservative party conference there have been calls for a new leadership election. Former Tory party chairman, Grant Shapps has mentioned that there are as many as thirty MPs who wish too oust May from her position. Now six months into her tenure you would have hoped she would now be in a stable position, but it is far from it. Political uncertainty historically weakens the currency in question so this situation does not bode well for the pound.
AUD Retail Sales
As mentioned earlier I believe the gains fro the Aussie are due to Sterling weakness rather than AUD strength, this is highlighted by the lack movement in favour of the pound following the worst Australian retails sales data in over four years.
Reserve Bank of Australia (RBA) assistant governor Guy Debelle is due to speak during the night and he does have the power to influence the markets. If he mentions monetary policy moving forward we could see volatility on the exchange. I would expect him to be dovish in terms of any potential rate hikes due to low wage growth, low consumer spending and increasing household debt.
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