GBP/AUD: Aussie Holds onto Post-RBA Gains

The British pound is lower against the Australian dollar on Tuesday afternoon following the decision from the RBA to keep interest rates unchanged. Though some better economic data from the UK unwound a large portion of the early losses in the pound.

GBP/AUD was lower by 24 pips (-0.13%) to 1.9394 with a daily price range of 1.925 to 1.944 as of 2pm GMT. The exchange rate had sunk below 1.93 during Asian trading but rebounded back to 1.94 as the day wore on. The moves today come after Sterling lost -1.51% on Monday against the Aussie dollar. 

GBP/AUD – Positive tone in the Governor Lowe official statement sent AUD higher

The decision to keep interest rates in Australia steady was expected but the positive tone in the official statement from Governor Lowe helped send AUD higher. This was not a meeting in which the central bank was preparing markets for lower interest rates. Moreover the RBA said it is reasonable to expect an extended period of low interest rates, which sounds a lot like a plan to maintain the current 0.75% RBA Cash Rate Target for the foreseeable future.

There were many excuses the RBA could have used to turn more dovish on (an intent to lower) interest rates but they chose not to. Some of these risks were mentioned and it was noted the RBA are prepared to ease further if necessary. These include the US-China Trade War and the potential for deterioration in the labour market.

The Pound Sterling

Construction data was front and centre in UK markets following a huge sell-off in the pound at the start of the week. The cause of yesterday’s selling has been laid at the door of Prime Minister Boris Johnson who continues to take a defiant stance against so called “level playing field” requirements from the EU.

Construction as well as the housing market has been a good barometer for the effect of Brexit, though other factors like higher taxes on foreign and buy-to-let owners have played a big role too. So rising confidence in the order books from purchasing managers in the construction sector bodes well for the rest of the UK economy in 2020.

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