The Pound Sterling to Australian Dollar exchange rate recovered some ground after declining by more than 1% on Tuesday morning.
The Pound Sterling to Australian Dollar exchange touched a session low of 1.9725
The Australian Dollar strengthened sharply against the Pound and rose by more than 1% against the US Dollar after the Reserve Bank of Australia (RBA) held interest rates unchanged but strongly hinted that more rate cuts are likely to occur over the coming months. In a statement that accompanied the rate decision, RBA Governor Glenn Stevens said that the ‘Aussie’ has further to decline and suggested that the rate cut made last month has yet to be felt in the wider economy.
‘RBA officials appear to be moving back to a strategy from earlier in the easing cycle, where they relegate the more explicit discussion of risk bias to the minutes. This avoids the optics of having a preset course that tends to be associated with specific guidance in decision statements,’ said Ben Jarman from JPMorgan.
As the session progressed, the Pound Sterling managed to claw back some losses.
Construction activity in the UK was shown to have rallied in May due to the surprise Conservative general election victory, which increased optimism amongst the nation’s builders. According to the Markit/Chartered Institute of Procurement & Supply purchasing managers index, activity rose to 55.9 in May, a rally from the 22-month low of 54.2 seen in the preceding month.
‘The result means that a period of political uncertainty is no longer on the horizon. Additionally, construction firms experienced an upturn in new business growth from April’s near two-year low and job creation was the fastest recorded so far in 2015. However, it is far from certain whether the relief rally in construction confidence will usher in a lasting turnaround in output volumes on the ground,’ said Markit’s Tim Moore.
In addition, offering support to the Pound was a separate report released by the Bank of England (BoE) which showed that the number of mortgages approved in the UK leapt to a six year high in April. The report showed that mortgage approvals for house purchases rose to 68,076. The rise was the biggest seen since February 2009.
The GBP/AUD exchange rate will experience more volatility on Thursday due to the publication of the latest Australian GDP Growth data and UK Services PMI.
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