Forex Analysis: RBA Pulls the AUD as Focus Shifts to the GBP
RBA has released its minutes on the monitory policy meeting they held on 5th Feb 2019. It delivered a more dovish statement than the markets had anticipated.
For the Australian Dollar
The RBA monetary policy meeting minutes include the following
- S-China trade tensions posed significant risks to the global economic outlook.
- Mining investment to start contributing to economic growth.
- Uncertain domestic consumption attributed to falling house prices and weak retail sales growth.
- Growth in China has been slower more than the most recent GDP numbers.
- Members noted that it’s appropriate to hold a steady cash rate and the Bank to offer stability and confidence.
- Members also noted that the probability of increasing or decreasing the cash rate was more evenly balanced. Over the preceding year, an increase in the cash rate had been more likely.
At the time of writing the minutes, the AUD stood at $0.7113, down 0.24% for the session. Then it moved from $0.71288 to $0.71206 following the release of minutes.
Elsewhere, the Kiwi Dollar remained at $0.6833. The Japanese Yen remained flat at ¥110.62 against the dollar.
The day ahead;
The following will affect the day;
- Outside of the politics, sentiment towards the U.S – China trade talks will influence risk sentiment.
- Monitoring of the Brexit chatter will continue outside of the stats.
- FOMC member Mester will speak this afternoon, could put more pressure on should there be any suggestions of the FED needing to hold rates steady through the year.
- Influence in crude oil prices and risk sentiments will give direction throughout the day.
Forex Analysis: Brexit, the Pound, and the political chaos
As UK political parties continue to divide, it’s also looking gloomy for the Pound.
The British Pound
The Brexit road has been a treacherous one for those with exposure to the Pound.
The EU Referendum back in 2016 caused a flash crash to a low $1.19048. Then a bounce back to a high of $1.43767 and later a downward spiral back to a low of $1.23 levels last month.
In spite of the Brexit vote having taken place back in June 2016, future uncertainties continue to plague the Pound, not to mention British politics.
Domestic politics, economic indicators, and uncertainty over how the economy will fare in the post Brexit era have ultimately done the damage.
The Economic Indicators
Last week figures showed the UK economy grew by just 2.0% in the 4th quarter last year.
January retail sales impressed with a 1.2% increase in core retail sales suggesting that Brexit is more of a political drama than a consumer one. However, the bounce back could be temporary.
Labor market conditions have been resilient to the uncertainties, but we’ll see if they will stay resilient.
UK industrial and manufacturing production has been dropping. The UK’s service sector almost stagnated at the beginning of the year.
All these come ahead of Brexit, and the UK government and UK politics don’t implode.
The divided UK parliament is failing to deliver people’s Brexit vote. The country is divided into two main political parties- the pro and anti-Brexiteers. UK political outlook could become as significant to the UK economy and the pound as Brexit itself.
Will the Pound hold on amidst the uncertainty?
The global economic outlook has shifted with downside risks on the rise. The Brexit timing could have come at a worse time.
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