- Reserve Bank of Australia hold interest rates for sixth time
- UK Budget fails to boost Sterling
- Consider protecting against currency risk
GBP-AUD is trading at almost two cents lower than this time last month, having moved up and down throughout the past month. The currency pairing reached 1.6465 on the upside and bottomed out at 1.6008 on the downside. Its latest movement was a fall last week, from 1.62 to 1.59.
Reserve Bank of Australia hold interest rates for sixth time
The main event for Australia this week was the Reserve Bank of Australia (RBA) rate meeting on Tuesday. The RBA kept rates on hold; a sixth straight hold, at its second meeting this year. A rate hike was not even viewed as a possibility by markets on Tuesday, with the market just pricing in a 0.4 percent chance of a cut. On the back of this, the Aussie dollar traded higher.
UK Budget fails to boost Sterling
With no other major data due out before the Spring Budget release on Wednesday, 8th March, (12.30pm UK time), the UK Chancellor of the Exchequer Philip Hammond’s plans are arguably the most talked about economic and political events in the UK currently (notwithstanding Brexit, of course), yet his announcements had little effect on the strength of the Pound. We had hoped for a little more movement than the initial small uplift we saw following yesterday’s Budget speech.
Chancellor Phillip Hammond unveiled a £2 billion funding boost for social care, as well as a major shakeup of education to create new grammar schools. He said that the UK economy will grow faster in 2017 than initially forecast in November. The Office for Budget Responsibility forecast Gross Domestic Product (GDP) would grow by 2 percent in 2017, up from a forecast of 1.4 percent, but lower than a forecast of 2.2 percent announced before the Brexit vote. On the back of his first full Budget in the House of Commons, Sterling strengthened somewhat against its major currency pairs, including the Aussie Dollar.
Sterling volatility highly likely
The market is showing more of a reaction to political data than economic data releases in the current climate. GBP-AUD exchange rate volatility is likely in the coming weeks, with plans from UK Prime Minister, Theresa May, to trigger Brexit officially with Article 50 from 15th March.
Consider protecting against currency risk
For those looking to transfer funds between GBP and AUD, it may be wise to consider a spot trade or forward trade to protect yourself against any adverse movements. These tools will allow you to protect yourself from any downside risk, as well as providing the opportunity to target better levels than what we are seeing currently.
Article supplied by Halo Financial, March 2017
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