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Australian Dollar Recovers from Worst Levels as Traders Bet on Delayed RBA Rate Cuts

Last week’s high: AU$1.8413

Last week’s low: AU$1.8227

RBA Signals Limit GBP/AUD Potential

Despite a lack of support for the Australian Dollar over the past week, and lingering bearishness around Australia’s economic activity, GBP/AUD failed to sustain its gains last week.

This is because Pound demand was also weighed down by a combination of UK political uncertainties and the Bank of England’s (BoE) own cautiousness.

The BoE cut UK expected growth rates for Q2 2019 to 0.0%, and some analysts read the bank’s cautious tone to mean that a rate cut from the BoE was possible as well.

In comparison, Reserve Bank of Australia (RBA) Governor Philip Lowe was a little less dovish than expected in a speech last week. He indicated that measures besides lower interest rates may be used rather than cutting rates further.

As a result, investor bets of a July rate cut from the RBA diminished somewhat, which helped the Australian Dollar to steady towards the end of the week. Analysts still predict there will be another rate cut sometime before the year ends, however.

 

AUD Outlook: Quieter Economic Calendar Leaves Central Bank Speculation in Focus

Not much notable UK or Australian data will be published for most of next week. The most noteworthy figures will be UK growth and Australian private sector credit data due on Friday.

As a result, Central Bank and political news will continue to be the biggest cause of GBP/AUD movement until the end of the month.

Speeches from RBA officials throughout the first half of the week could influence movement in the ‘Aussie’ if they show any surprising shifts on monetary policy signals.

The Pound’s movement, on the other hand, will be focused on political developments with the Conservative Party leadership contest entering the next phase. The party’s membership base will be voting between Boris Johnson and Jeremy Hunt to decide on the next leader.

The Australian Dollar remains sensitive to US-China trade tensions as well, so any developments in relations between the nations ahead of the G20 summit at the end of the month could cause some AUD movement as well.

 

Key Events

24th June

11:00 UK CBI Distributive Trades

25th June

08:05 RBA Bullock Speech

26th June

09:30 UK Finance Mortgage Approvals

28th June

00:01 UK GfK Consumer Confidence

02:30 Australian Private Sector Credit

09:30 UK Growth Rate

09:30 UK Business Investment

 

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To keep up to date with the Australian Dollar, visit the AUD blog in our Currency News section.

 

Alastair Archbold
Currency Trader
T: 01442 892 062

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