Overnight the UK economy reported their inflation levels for the month of July. The previous month saw the Consumer Price Index of the UK result in an unexpectedly high figure of 1.9% which gave great strength to the Sterling. On this occasion though, the targeted figure of 1.8% was not reached, resulting in a printed figure of 1.6%. This caused the Pound to fall quickly by over half a percent and saw the Aussie reach its’ highest level against the Pound in 4 months.
Yesterday the Reserve Bank of Australia released the Minutes of their monetary Policy Meeting. The Minutes indicated once again that it foresees a considerable period of interest rate stability and that the Australian Dollar remains high by historical standards. Although the RBA also mentioned that output growth will probably be softer in the near term, the currency market responded by strength being given to the AUD as it moved up by close to a quarter of a percent against the majors.
On the domestic front today, Governor Stevens, Head of the reserve Bank of Australia, will provide his Semi-Annual Testimony on the governing bodies’ perception of the current Australian economic condition at 9:30am AEST. Lower-tier data concerned with the Westpac Leading Index and Skilled Vacancies will follow the testimony.
The Bank of England Minutes will be released tonight at 6:30pm AEST. The Minutes may be more dovish in terms of indicating the timeframe in which an interest rate rise is likely to occur. This is due to the very bearish tone of the BoE’s Inflation Report last week and the fact that the UK economies wage forecast was downgraded, meaning that an interest rate rise in the near future may have a damaging effect to the UK recovery. The underlying tone of the Minutes will be listened to carefully and the market will react accordingly to the tone.
Another major release will occur out of the UK tomorrow evening to make it a hat-trick of high-tier data releases over 3 consecutive days. The UK annualised Retail Sales will provide an insight into consumer demand and economic growth and economists are targeting a figure of 3.5% which is a slight decrease from the previous figure of 4.0%.
With the Australian Dollar currently trading around a 4 month high against the Pound, it seems as though the momentum has shifted back in favour of the AUD, especially since an interest rate hike by the BoE has been put on the back burner. It will take some great data out of the UK in the next couple of days to push the value of AUD to GBP back down.