GBP/AUD: Aussie Declines After RBA’s Meeting Minutes

• One British pound buys 1.9065 Australian dollars, up 0.28% as of 6:00 AM UTC
• GBP/AUD started the ascending trend on November 7, and it’s close to update the year-to-date peak
• Sterling is driven by Brexit optimism – Conservatives strengthened their position ahead of the election

GBP/AUD continues its bullish journey on Tuesday, as the Reserve Bank of Australia (RBA) revealed its dovishness. Elsewhere, the sterling is driven by Brexit optimism. This happened after a UK poll showed the Conservatives strengthened their position ahead of the election scheduled for December 12.

Currently, one British pound buys 1.9065 Australian dollars, up 0.28% as of 6:00 AM UTC. The pair started the ascending trend on November 7, and is close to update the year-to-date peak.

Earlier today, the RBA revealed that it was close to cutting its interest rates this month, according to its meeting minutes. The news surprised investors, who were certain that there was no room for a cut at the November meeting. Now economists expect the central bank to become more open to slashing the rates. 

The RBA cited the disappointing wages growth and inflation figures. While the board was close to reduce its record-low rate, members agreed to wait and weigh the impact of the previous three cuts since June. 

The central bank’s minutes put pressure of the Aussie, which fell against all majors. 

RBC Capital Markets strategist Robert Thompson commented:

“This was a broadly dovish set of minutes, and at the margin makes December more “live” than it previously was.”

Still, the markets expect the RBA to leave the rates unchanged until February next year, when the probability of a cut is estimated at 72%. The central bank itself admitted that further easing might lead to negative effects on consumers’ confidence and savers. Past data showed that consumer sentiment tumbled after each rate cut. 

Nevertheless, analysts expect the RBA to continue easing anyway. Thompson said:

“Given the latest weak labour force data, we remain inclined to think they put confidence concerns aside and cut again in February.”

He referred to the latest figures that showed the largest decline in monthly employment in three years. Traditionally, the labour market has been one of the strongest sectors in the Australian economy, so any signs of weakness represent a case for further stimulus. 

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