GBP/AUD: Aussie Stronger as RBA Leaves Rate Unchanged

GBP/AUD tumbles on Tuesday to the lowest level since November 25. Currently, the pair is trading at 1.8910, down 0.32% as of 5:39 AM UTC.

Investors turned bullish on the Aussie after the Reserve Bank of Australia (RBA) kept its interest rates unchanged and didn’t focus on any further cuts for now. Instead, the central bank members weighed the impact of the previous three rate cuts this year. Economists and money markets expected no change in the interest rate.

RBA Governor Philip Lowe commented:

“Given these effects of lower interest rates and the long and variable lags in the transmission of monetary policy, the Board decided to hold the cash rate steady at this meeting while it continues to monitor developments, including in the labor market.”

“The Board is prepared to ease monetary policy further if needed,” he added.

Analysts expect a rate cut to 0.5% by April next year. Moreover, the RBA might slash the rate to 0.25% and even startup an aggressive quantitative easing program if the targets of the gross domestic product (GDP) growth are not met.

The central bank’s decision comes a day ahead of GDP data, which is expected to show that the economic growth accelerated by 0.5% in the three months to September.

The RBA’s latest three cuts helped the housing market, which had its best month in 16 years in November.

Nevertheless, other sectors dragged down the economy. Australia’s GDP has decelerated in the past 12 months, especially because households started to spend less while the sentiment has been weak.

David Plank, head of ANZ’s Australian economics, commented:

“Annual GDP growth may accelerate a touch, but this hardly points to an economy that is undergoing more than a gentle turn, one that is unlikely to be enough to stop unemployment moving higher. Sentiment looks set to be challenged for a while yet.”

In the UK, retail sales increased last month, based on data that excludes Black Friday distortions. The British Retail Consortium announced that total spending, including the Black Friday, declined by 4.4% in November compared to the same period in 2018. Nevertheless, adjusting for that distortion, the reading looks better — up 0.9% year-on-year.

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