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GBP/AUD: Meeting Minutes Show RBA Considered Easing

18th February 2020

The British pound is higher against the Australian dollar on Tuesday with the Aussie selling off following dovish minutes from the last Reserve Bank of Australia meeting and the pound gaining after new Chancellor Rishi Sunak confirmed the March 11 budget will go ahead as planned.

GBP/AUD was up by 134 pips (+0.69%) to 1.9496 with a daily price range of 1.936 to 1.952 as of 2pm GMT. GBP to AUD rallied over 100 pips from beneath 1.94 to over 1.95 to its highest since February 3^rd. Tuesday’s gains reverse Monday’s losses to make a weekly return of +0.33%.

The Australian dollar

The Australian dollar nosed-dived after the Reserve Bank of Australia (RBA) released minutes from its latest policy meeting. The losses in the Aussie accelerated as global stock markets retreated over growing coronavirus fears.

As a reminder the RBA opted to leave Australian interest rates at 0.75% and accompanied the decision with a surprisingly bullish outlook for the economy. The minutes reveal that behind the scenes the policymakers grappled with the idea of cutting rates to a new record low of 0.5%. The prospect of lower interest rates tends to put downward pressure on a currency, in this case the Aussie.

The British pound

Some sense of political certainty and mixed economic data were the main drivers for Sterling on Tuesday. The pound turned a corner in the afternoon when new Chancellor Rishi Sunak announced the UK budget would go ahead as planned on March 11. The rumour mill had been turning with suggestions it would be delayed while Sunak established himself at the Treasury following his late entry to the role of Chancellor last week.

Earlier today, traders reacted to slightly softer than expected wage growth in December, which came in at 2.9% instead of the 3% economists had forecast. Wage growth is a key determinant of inflation, which is something the Bank of England recently cited as a reason rates could be lowered. Elsewhere, the ‘claimant count’ rose by 5,500 when a larger increase to 22,600 had been expected but the unemployment rate held steady at 3.8%.