GBP/AUD: RBA lowers its forecasts for Australia

The British pound is up against the Australian dollar (GBP/AUD) on Friday after central bankers in Australia lowered their forecasts for economic growth while Sterling benefitted from some short covering at the end of a difficult week.

GBP/AUD was higher by 174 pips (+0.91%) to 1.9377 with a daily price range of 1.919 to 1.939 as of 2.30pm GMT. After moving above 1.925 the currency pair made short work of a move back above 1.93. The daily gains leave the currency pair with a weekly decline of -1.64%.

GBP/AUD – Reserve Bank of Australia (RBA) lowered its growth forecasts for Australia

The Reserve Bank of Australia (RBA) lowered its growth forecasts for Australia, knocking the Australian dollar at the end of a positive weekly performance against the British pound. The RBA predicted wage growth was unlikely to see significant improvement and referred to the external drag on the Australian economy from the slowdown in China as well as the US-China trade war. The bias at the central bank looks like it has switched to easing, though it acknowledged the risks to lowering interest rates again when house prices are rising at a rate that is excluding a lot of Australians from owning a home, not to mention adding inflationary pressures.

Added to the downbeat assessment of the Australian economy were a floof of disappointing economic data for Australia. A deterioration in the trade balance in December to a surplous of 5223M from 5518M, weak retail sales for January which fell -0.5% month-over-month and further contraction in the service sector according to survey data compiled by Australian Industry Group (AiG) were all a drag on the Aussie.

Pound Sterling

While some weakness in the Aussie dollar helped Pound sterling recoup some its weekly losses, it has nonetheless been a wake-up call for those expecting good times ahead for the British currency. Having been one of the best performing currencies in January, it has been the weakest in the G10 this week. Having been debating the next monetary policy decision for most of January, in the first week of February attention has shifted back to Brexit and trade negotiations with the EU.

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