Australian Dollar Recovers Against Pound Following Bank of England (BoE) Meeting
The Australian Dollar’s recent rally ran out of steam this week and has been falling from its highs due to the cautious tone of the Reserve Bank of Australia (RBA) and underwhelming domestic data.
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AUD GBP began this week trading at around 0.6084 but has tumbled since markets opened. On Thursday the pair hit a fortnight-low of 0.5987, but recovered slightly after the BoE meeting in the European session.
Australian Dollar (AUD) Weakens as Australian Trade Disappoints
This week’s Australian Dollar downtrend continued on Thursday morning as disappointing Australian trade data gave investors more reason to sell the antipodean currency.
June’s Australian trade balance report was forecast to slip from A$2.47b to A$1.8b, but it dropped from a revised A$2.02b to just A$0.86b.
This was due to an unexpected -1% contraction in Australian exports in June, while imports rose from 1% to 2%.
Due to the disappointing trade data, investors overlooked AiG’s solid July services PMI, which improved from 54.8 to 56.4.
The Australian Dollar saw limp trade during the Asian session overall as data, commodity news, and the past week’s Reserve Bank of Australia (RBA) news weighed on the ‘Aussie’ outlook.
Pound (GBP) Tumbles as Bank of England (BoE) Lowers Growth Outlook
The Australian Dollar to Pound exchange rate recovered slightly during Thursday’s European session as the Pound weakened in reaction to the day’s Bank of England (BoE) policy decision.
As analysts expected, the Bank of England left monetary policy frozen at its loosest levels on record.
Many analysts predicted that only two policymakers would vote for a rate hike this month, and as expected only hawks Michael Saunders and Ian McCafferty voted to hike interest rates.
This was less hawkish policymakers than in June, as hawk Kristin Forbes has since stepped down from the Monetary Policy Committee (MPC).
Pound investors were disappointed by the dovishness of bank officials, as the bank also downgraded its UK growth outlook and wage growth forecasts.
The previous 2017 growth forecast was 1.9% and the bank now predicts growth of just 1.7%. They expect growth to slow further to 1.6% in 2018.
The bank forecasts 2018 wage growth will be around 3% and miss the previous projection of 3.5%.
AUD/GBP Forecast: Australian Retail Sales Stats Ahead
The Australian Dollar to Pound exchange rate is unlikely to see more significant changes in movement before the end of the week.
However, the Australian Dollar could be influenced slightly by Australia’s June retail sales results, which are forecast to slow from 0.6% to 0.2%.
If retail sales beat expectations, AUD GBP could recover more before the end of the week. Poor retail sales could see AUD GBP slip towards its lows again though.
AUD GBP currently trends well below the week’s opening levels despite the Pound’s Thursday weakness. The pair is unlikely to return to near the week’s opening levels before markets close on Friday.
Pound investors also have nothing new to react to until next week, when Britain’s June trade balance, manufacturing and industrial production results will be published
AUD GBP Interbank Rate
At the time of writing this article, the Australian Dollar to Pound exchange rate trended at around 0.6040. The Pound to Australian Dollar exchange rate traded near 1.6545.