Pound Sterling to Australian Dollar (GBP/AUD), US Dollar (GBP/USD) Exchange Rate Forecast: Fed, RBA and BoE Interest Rates in Focus
The Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Australian Dollar (GBP/AUD) exchange rates were trading lower on Thursday after negative UK ecostats emerged against upbeat Australian data and hawkish US Federal Reserve comments.
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The Pound softened significantly against the ‘Aussie’ this week after the Reserve Bank of Australia (RBA) kept rates stable at 2.25% rather than making another downward adjustment. However, Australia’s construction sector looks like it’s taken an upswing in March, a development that’s boosted sentiment in the Australian Dollar exchange rate.
Australian Construction Sector Boosts ‘Aussie’ (AUD) Exchange Rate
The AiG/HIA Performance of Construction Index recorded a jump from 43.9 to 50.1 in March, advancing above the 50.0 benchmark reading which separates expansion from contraction.
HIA senior economist Shane Garrett commented: ‘It is therefore important that new home building activity does not end up being stifled by the unhelpful policy settings in place, both for the sake of economic growth in the short term and Australia’s housing requirements over the longer term.’
‘In this regard, the RBA’s decision not to reduce interest rates this week adds to uncertainty across the economy and represents a lost opportunity.’
Australia's AIG-HIA performance of construction index -8pts to 45.4 in November. First contraction since May, largest fall since Sept 2008
— David Scutt (@David_Scutt) December 4, 2014
Meanwhile, the US Dollar exchange rate has also been fluctuating on account of central bank actions. The Federal Reserve released its March 17/18th minutes in Wednesday’s North American session which saw policymakers of the Federal Open Market Committee (FOMC) remain divided on the prospect of increasing borrowing costs in June.
It’s fair to say the market has been gearing up for a rate hike in June after months of speculation; however, the minutes were recorded prior to last week’s unfavourable Change in Non-Farm Payrolls ecostat which came in at only 126K in March rather than the 240K forecast.
As the Federal Reserve has placed heavy emphasis on the labour market as a driver for rate hikes, the US Dollar to Pound Sterling (USD/GBP) and US Dollar to Australian Dollar (USD/AUD) exchange rates sank as the ‘Greenback’ softened broadly.
The Federal Reserve minutes read: ‘Several participants judged that the economic data and outlook were likely to warrant beginning normalisation at the June meeting.’
‘However, others anticipated that the effects of energy price declines and the Dollar’s appreciation would continue to weigh on inflation in the near term, suggesting that conditions likely would not be appropriate to begin raising rates until later in the year, and a couple of participants suggested that the economic outlook likely would not call for liftoff until 2016.’
Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast
The Pound Sterling exchange rate sank in Thursday’s session on account of a larger-than-forecast widening of the UK trade deficit. However, the upcoming Bank of England (BoE) interest rate announcement is likely to cause fluctuations later in Thursday’s trading.
Looking ahead to Friday, UK Industrial Production, Manufacturing Production and the NIESR Gross Domestic Product Estimate will all be released and are expected to moderately influence the Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Australian Dollar (GBP/AUD) exchange rates.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trading at 1.4818. The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trending in the region of 1.9149.