The GBP to AUD exchange rate rocketed higher this week to reach a four month best conversion on the back of the publication of opinion polls favourable to the ‘Remain’ campaign for the ‘in / out’ referendum of the UK’s membership of the EU (European Union) on 23 June. The Aussie was also hurt by a ‘dovish’ policy statement from RBA (Reserve Bank of Australia) Governor Glenn Stevens.
The British pound and the Australian Dollar have been at opposite ends of the exchange rate scale today.
On the UK’s side, the Pound has tanked due to EU Referendum debates about immigration and poor GDP stats making it an unattractive prospect. The Australian Dollar, meanwhile, has been highly desirable due to rising metal prices and a lack of clarity over US interest rate hike chances.
The optimistic mood towards the British pound (GBP) exchange rates finally waned on Thursday morning when investors were reminded that domestic growth remains weighed down by slowing pressures.
As a result, in spite of Australian investment figures proving decidedly bearish, the pound to Australian dollar exchange rate entered a sharp slump.
Foreign exchange investors remained confident in the sterling on Wednesday, with the GBP/AUD continuing to push best conversion levels.
The Aussie-sterling cross rose as further support for the ‘Remain’ campaign was generated by an Institute of Fiscal Studies (IFS) forecast.
As the think tank suggested that a vote to leave the EU could result in two years of additional austerity measures for the UK markets were inclined to lower the odds of a ‘Brexit’ further.
After the latest opinion poll saw sterling strengthen, the GBP to AUD exchange rate staged a strong advance on the forex markets.
In the UK, the opinion polls all continue to favour the ‘Remain’ campaign ahead of 23 June polling day with Bloomberg now reporting only an 18% chance of a ‘Brexit’ vote.
This caused the Pound Sterling to advance versus all sixteen of its most actively traded peers.
Meanwhile, damp market sentiment weighed on demand for the Australia Dollar thanks to falling commodity prices and volatile global equity markets.
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Pound to Australian Dollar Forecast: Bank of England (BoE) Governor Mark Carney Warns of ‘Brexit’ Risks
Bank of England (BoE) Governor Mark Carney defended the Bank’s rhetoric on the 23 June referendum poll again, this time to the Treasury Select Committee
Carney said “I am not intending to [say something else] but I'm one person on the committee. Given the degree of uncertainty engendered by the referendum campaign and its impact on economic variables, I would not exclude the possibility that there is some evolution of the committee's thinking on that. I'm one member of the committee, we'll have a few more weeks of data, things will move around, there may be a judgment around that."
Carney also spoke to the possibility of UK interest rate rises in the event of a ‘Brexit’, saying he and Chancellor George Osborne have discussed potential developments on risk premium on sterling assets.
Carney said "For both of our direct responsibilities that risk is relevant. I would characterise it thus - the combination of the effects on demand and supply in the exchange rate ... could result in either a lower or a higher bank rate."
Dovish Reserve Bank of Australia (RBA) Governor Stevens Speech Weighed on Australian Dollar (AUD) Exchange Rates
The Pound enjoyed new found support in the foreign exchange market, climbing to rates not seen against the Aussie since the beginning of the year helped by a softening Aussie dollar with traders reacting to the ‘dovish’ comments from RBA Governor Glenn Stevens overnight.
In remarks at the Trans-Tasman Business Circle boardroom briefing in Sydney, Stevens said the RBA is “very committed to the inflation targeting monetary policy framework”.
This recommitment by Stevens to the inflation targeting regime and the 2-3% band strongly hinted that the RBA will again lower rates in order to drive inflation higher.
Stevens also said the Aussie is “doing what it is expected to do” by acting as “shock absorber” for the economy.
Of interest, Stevens added a little fuel to the Aussie’s fall by commenting that China’s “economic transition is on a scale that no one has ever done before” which means the end result is still uncertain. He also noted that demand for housing finance was slowing.
Traders and investors reacted immediately and begun pricing in the possibility that in the near term future, the RBA may be set to cut Australian interest rates, already at their all-time record low of just 1.75% down by another notch.
With the Aussie already under political pressure due to the general election called for 2 July, the Dollar fell by nearly 2% at one point against the Pound to reach its lowest level since the beginning of the year.
Support levels are set at 2.0334 and 2.0305 thereafter with resistance at 2.0400 and 2.0437 thereafter.
Today finds the pound to pound spot exchange rate priced at 1.
FX markets see the pound vs us dollar exchange rate converting at 1.243.
At time of writing the pound to new zealand dollar exchange rate is quoted at 2.107.
The live inter-bank GBP-CAD spot rate is quoted as 1.712 today.