GBP/AUD Drops Towards 1.90
The Aussie has performed well against sterling over the last few days as inconclusive minutes from the Federal Reserve’s latest policy meeting provided no insight as to when the US central bank would look to tighten policy. As a result, investors have flocked to the Aussie dollar in search of guaranteed higher yield, forcing GBP/AUD down in the process.
The minutes published on Thursday showed that the board members at the Federal Reserve had mixed opinions as to when the US would be ready for an interest rate rise. Some members are arguing for a rate rise in June, while others suggest the economy will not be ready for a hike until September. The uncertainty lead to a weakening of the US dollar, strengthening the Aussie in the process.
“Several participants noted that the [US] dollar’s further appreciation over the intermeeting period was likely to restrain US net exports and economic growth for a time,” the Fed minutes said.
Most analysts are expecting the Aussie’s gains to be short lived though, as there are still expectations of another interest rate cut from the Reserve Bank of Australia at the next policy meeting. Commodities prices, particularly that of iron ore, have continued to fall and this is weighing heavily on the Australian currency. The RBA have said that a weaker Australian dollar is need to facilitate balanced, robust growth.
On the sterling side of the cross, the pound has come under pressure recently as the UK approaches the general election. The pound tends to weaken during periods of political uncertainty, with last year’s Scottish referendum being a prime example. Most analysts are expecting the pound to weaken further as the election draws nearer, with falling inflation also contributing to a sterling sell-off.
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