The AUD/GBP exchange rate experienced a volatile night; Sterling gained almost 0.5% before the gain was lost against the AUD.
Yesterday, the RBA monetary Policy Minutes were published for the Interest announcement two weeks ago. The announcements gave investors more insight into the thoughts of the Committee that controls Australia’s Monetary Policy.
Their thoughts continued the theme of recent announcements, as the Reserve Bank of Australia stated:
‘In their assessment and given the information available, the Board judged that the current accommodative stance of monetary policy continued to be appropriate to foster sustainable growth in demand and inflation outcomes consistent with the target over the period ahead. Members considered that the most prudent course was likely to be a period of stability in interest rates.’
This said to investors that the Interest Rates are staying as they are for the foreseeable future; an announcement that was met with a muted response by the FX market given that there was little movement in the GBP/AUD pairing.
The RBA also added that they thought that Australia’s and our global partners economies are performing a little above average. The RBA also stressed about the uncertainty in China’s Economy;
‘Chinese GDP growth had been steady in the September quarter and close to the authorities’ target of 7.5 per cent for 2014. Members noted that the composition of growth had continued to shift in a manner consistent with China’s transition to a more balanced growth model; investment growth had eased further while consumption growth had been steady, and the service sector had continued to record slightly stronger growth than the manufacturing sector.’
As the Australian Economy relies strongly on the Chinese economy, it is of the utmost importance for Australia that the Chinese Economy stays afloat. The statement above indicates the thoughts that China is becoming a more stable and balanced economy; coming after the preceding 13 years of enormous growth. Should at least a moderate level of growth continue, the AUD should remain supported against the Major currencies.
The Bank of England released their much anticipated Consumer Price Index. The figure surprised investors to the upside as it came in above expectations of 1.2%, at 1.3%. This was good news as the UK was looking to face the same ‘Low-flation’ problems as the Euro-zone is faced with. However, there is still a considerable distance between the current CPI rate and the 2% Inflation Rate that the BoE have flagged as a precursor for an Interest rate rise.
The AUD should remain level heading into the weekend; the votes are out for the Interest rate and assets purchasing facility in the UK. This will give investors an indication to the likelihood of monetary policy change over the next few months.