The Australian Dollar recovered some ground against the majors in the lead up to the weekend, following on from the big losses it suffered following the release of the poor Australian employment figures released last Thursday. Its’ next significant movement is likely to be in response to the release of the Reserve Bank of Australia’s (RBA) Minutes tomorrow.
The Australian employment figures released last week revealed that employment conditions in Australia are actually worse than expected. Approximately 12,000 jobs were erased from the Australian economy which was 7,000 more than the Employment Change forecast of negative 5,000. The official Australian Unemployment Rate was expected to rise from 6.1% to 6.2%, however it jumped to equal the 12 year high of 6.4%. This caused the ‘Aussie’ (AUD) to continue on its’ downward trend, losing approximately a full percent against the majors last Thursday.
It is a relatively quiet day of domestic data releases, with the Australian economy releasing the percentage change to New Motor Vehicle Sales. Economists will be more focused on the Minutes of Reserve Bank of Australia’s (RBA) Monetary Policy Meeting scheduled for release tomorrow at 10:30am AEST. The Minutes will provide an insight into the reasons the RBA cut interest rates when they met last month.
When the RBA Minutes are released, particular attention will be paid to any indication of the governing body’s standpoint in relation to the potential for future interest rate cuts. The Australian Dollar (AUD) is likely to soften further if the RBA suggests the likelihood of further interest cuts; whilst if the policy makers forecast a period of stability following on from the recent rate cut than we may see the ‘Aussie’ break its’ downward trend.
Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Recovers After Hitting 5 and Half Year Low
The AUD/GBP exchange rate hit the lowest rate it has been since August 2009 last Thursday evening at sub 0.50 levels. It has managed to recover slightly since then to trade around the 0.5044 mark.
The AUD/GBP exchange rate trended downward last week to hit the lowest point it has been in 5 and a half years after Mark Carney, Head of the Bank of England (BoE), took a positive tone in regards to the quarterly Inflation Report. Carney communicated that the UK is not currently experiencing ‘deflation’ and that the BoE expect the Consumer Price Index (CPI) to recover to hit the target rate of 2% within two years.
CPI in the UK is currently at its lowest level in over 14 years and the next announcement concerning this economic indicator will occur tomorrow evening. The forecast is that the annualised CPI figure will decrease further to 0.3%. If a higher than expected figure results the AUD/GBP exchange rate could trend back down towards a new low, whilst a lower than expected reading could prop up the ‘Aussie’ (AUD) against the ‘Pound’ (GBP).