Stevens Ensures Australian Dollar Under Heavy Selling Pressure vs Pound Sterling, Dollar

Another momentus push higher in the GBP to AUD exchange rate has taken place over recent hours as markets are seen increasing bets that the Reserve Bank of Australia will cut interest rates once more.

The pound to Australian dollar exchange rate has surged by one and a quarter percent ensuring those with impending Australian dollar payments are seeing the best rate to exchange currency since mid-February.

The push to levels at 2.0300 makes it increasingly likely that we are about to witness the 6th consecutive week of gains in sterling-Aussie.

At the end of April, the Australian dollar was spanked by a sudden, and apparently unexpected, slump in inflation which subsequently prompted an interest rate cut by the Reserve Bank of Australia.

The RBA has cut rates to 1.75% and could be about to cut to 1.5% soon markets believe.

Inflation is the crux for RBA decision-making, therefore any comments from the Bank on the matter were always going to be heavily scrutinised.

In remarks to the Trans-Tasman Business Circle Governor Stevens defended the current target band inflation target, adding that inflation was difficult to control in the short term.

Stevens reiterated that the Bank remained “very committed to the [2-3%] inflation target.” He noted that monetary policy was less powerful, and the impact was taking a little longer to come through, but “by the same token, we should not give up.”

Latest Pound / Australian Dollar Exchange Rates

	Live: 2.0145▼ -0.08% 12 Month Best: 2.1645
*Your Bank's Retail Rate	1.946 - 1.9541
**Independent Specialist	1.9863 - 1.9943 Find out why this is a better rate

* Bank rates according to latest IMTI data.

** RationalFX dealing desk quotation.

 

This could well be a sign of intent with regards to cutting interest rates further, thereby undermining the AUD.

Stevens confirmed the adjustment that was taking place in the value of the Australian dollar was entirely appropriate.

“We think that today’s comments suggest that the Bank will continue to respond to inflation, but will not slavishly cut rates in response to further disappointment on the inflation front. With growth looking okay, we continue to look for another 25bp cut at the August meeting with the Bank on hold following that,” says Katie Hill at ANZ Research.

Outlook for the Australian Dollar

There really is clear air above the GBP/AUD conversion from here with the pair seen positive momentum indicators continuing to advocate for further advances.

The 20 day moving average has now crossed above the 50 day moving average, an occurrence often considered to signal an acceleration in an upside trend.

We do however remain wary that the Relative Strength Index is trading well above the overbought signal at 70, we have not seen such conditions since November 2014 and note that it is often a case that a period of corrective decline or consolidation sets in when such readings are given.

Therefore, we should expect such action.

However, we have no target level at hand which could hint at when such a move could occur.

Australian / US Dollar Outlook

Regarding the AUD/USD, the exchange rate keeps pushing lower which confirms that selling pressures are still there.

Hourly support is located at 0.7156 (intraday low).

According to Yann Quelenn at Swissquote Bank, stronger daily support is given at 0.7110 (29/10/2016 low) and hourly resistance is located at 0.7228, the pair is expected to show further weakness.

“In the long-term, we are waiting for further signs that the current downtrend is ending. Key supports stand at 0.6009 (31/10/2008 low) . A
break of the key resistance at 0.8295 (15/01/2015 high) is needed to invalidate our long-term bearish view,” says Quelenn.