– GBP / AUD strengthened at 1.78
– Enteros ascending
– Relative forecast of the Central Bank in favor of the pound
– Currency intervention drags on AUD
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- GBP / AUD rate at the time of publication: 1.7983
- Bank Transfer Rates (indicative guide): 1.7353-1.7479
- Rates for money transfer specialists (indicative): 1.7511-1.7856
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The pound to Australian dollar exchange rate has moved to the fore and may remain high in the coming days before trading in an upward range in the coming weeks, as the relative outlook for central bank policy favors the pound’s superiority and the pound’s higher exchange rate. Australian dollar. …
The pound sterling rallied against many of its major currencies on Tuesday, while the Australian dollar showed weak momentum, with the price action beginning as the US dollar rallied in tandem with preliminary increases in US government bond yields.
Recent ranges in major exchange rates suggest that the GBP / AUD has significant support around 1.7850, which is a natural candidate for the lower end of the expected GBP / AUD upside range, and will trade around 1.81 if Aussie’s creeping low momentum continues to block the AUD / Dollar attempts to overcome 0 , 78.
But there are many reasons to believe that the Australian dollar’s low yields may also persist.
“The range so far after the meeting has been rather modest: trade ranged from 0.7741 to 0.7755. There have been a number of changes to the RBA’s wording in terms of the foreign exchange market, ”says Robert Rennie, head of financial market strategy at the company. Westpacmeaning AUD / USD.
IN Reserve Bank of Australia (RBA) announced a moderate hike in its outlook for the economy on Tuesday before leaving its money rate unchanged at 0.10%, and all parameters of other monetary policy programs also remained unchanged, although its statements against the currency speak for themselves for myself.
The RBA continued to note this month that the trade-weighted Australian dollar is at the top end of its range since recent years, even though at the same time it decided to remove a line in its statement that previously suggested that the bank’s policies “were conducive to at a lower exchange rate than otherwise. “
Above: GBP / AUD is displayed at daily intervals along with AUD / USD.
Westpac and others have interpreted the RBA’s change in wording for the Australian dollar as something like “assuming that commodity prices and exchange rates are currently out of policy focus.”
However, most likely, this author believes the opposite.
The RBA had no choice but to remove the above line from its monetary policy statement, although it continued to express concerns about the level of the trade-weighted Australian dollar as it appears to have intervened directly in the market. … …
The RBA would deliberately be lying if it reiterated its claim that its interest rate and quantitative easing policies are responsible for keeping the Australian dollar pegged, which it could not have done for obvious reasons, so this omission in the statement is not in any case “Everything is clear” for the Australian dollar bulls.
GBP / AUD Predictions for 2021
Period: 2 quarter 2021 and beyond
FX Guide for Business
“The RBA stressed that the decision to control the yield curve and future bond purchases will be announced at the Board meeting on July 6,” said Elias Haddad, senior currency strategist at the company. Commonwealth Bank of Australiawith reference to the RBA’s decision on monetary policy on Tuesday.
The RBA’s turn towards foreign exchange interventions was highlighted here Pound Sterling Live, and explains why the Aussie may still have trouble climbing above 0.78, which will be a favorable outcome for the pound against the Aussie this week and beyond.
Readers can read more about the reasons for the RBA’s intervention here, as well as a little about the possible preconditions for any eventual decision by Gov. Philip Lowe and his colleagues to hide their guns, although the most important thing in all of this is the bank’s long life. – an urgent struggle to achieve the inflation target from 2% to 3%.
“The encouraging global growth outlook, coupled with a favorable backdrop for Australia’s balance of payments and a depressed exchange rate, suggests that AUD / USD has room to rise to 0.8200. However, the relative trends in monetary policy between the Fed and the RBA mean that the uptrend in AUD / USD will be volatile, ”said Haddad of the CBA.
Above: GBP / AUD is displayed at weekly intervals along with AUD / USD.
Readers may have been surprised, dumbfounded, or perhaps even stunned to see earlier on this page the speculation that the pound sterling is outstripping and the GBP / AUD will rise several weeks in advance.
After all; The Australian dollar is a commodity currency offering “high beta” exposure to the expected global economic recovery and, as the analyst community often notes, some commodity prices have halved and in the process have increased what was already a notable perceived “undervaluation” of the Australian dollar.
As a result, some financial models of commercial banks estimate this “fair value” per country mile north of the far threshold of 0.80 in the AUD / USD pair, although it matters that if the RBA allowed the Australian to close the gap by moving up to At levels, the bank risks seeing its inflation target turn into smoke.
These are inflation targets that matter primarily to the vast majority of central banks, which are far less concerned with the “fair value” of asset prices than with inflation targeting, and it just so happens that the rise in exchange rates is subsidizing imports. and as a result may affect the consumer price index.
The RBA and others cut interest rates to zero and provided an unprecedented level of monetary support to economies in hopes of raising inflation to desired levels in the coming years, while the RBA, at least and obviously, was not about to just mess around. the speculative corner of the foreign exchange market tramples on its target.
This is very supportive of the trend of the pound against the Australian dollar, although much of the outlook for the pound sterling still depends on the results of trading on Thursday. Bank of England political decision.
Above: Market expectations for interest rate changes by G10 central banks. Source: Marquee, Goldman Sachs.
Gov. Andrew Bailey and his colleagues will present their latest views on the current state of the UK economy and its outlook for the future, although Sterling and investors will be most interested in details about the outlook for inflation and the likely timing of any possible decision to start raising interest rates. tariffs.
The UK economy has had fewer inflation challenges in recent years than many others, and is widely recognized as a contender to spearhead the recovery of major economies this year thanks to an accelerated vaccine-fueled reopening.
Meanwhile, pricing in interest-bearing derivatives markets this week suggests that investors still inexplicably believe the RBA and a host of other central banks are likely to raise their interest rates before the Bank of England.
This offers amusing value and also implies that the pound sterling and the pound / dollar could rally in the coming weeks if any of the Bank of England’s Thursday statements make investors question those specific assumptions.
The decision of the Bank of England will be published at 12:00 on Thursday and will be the culmination of the week for the pound.