australian dollars with coinsThe Australian Dollar fell against GBP, EUR and USD in the early hours of yesterday morning after Retail Sales figures for February were released at -0.1%, far below the expectation of 0.3% and previous reading of 0.4% in January. Poor weather conditions was a significant contributor to the drop, as February saw more rainfall than usual, especially in the Eastern State capitals.
However, these losses were reversed during the course of the day, as Inflation for the month and year were both higher than the previous estimates. The most impressive economic data release was Building Permits which were expected to fall but -0.1% but actually rose by 8.3%, and shows a significantly strengthening housing market.
The Reserve Bank of Australia decided to keep Interest Rates on hold this morning at 1.5%, for the twelfth consecutive month. Economists have now pushed back their forecasts for no change in Interest Rates now until late 2018. The reason behind keeping rates on hold is due to an increasing worry about house prices in Australia – house prices in Sydney have grown by 18.9% compared to the average capital city prices at 12.9%.
During the press conference afterwards, Philip Lowe said that household borrowing, predominantly due to purchasing property, far outweighed household income. The AUD weakened sharply after this announcement against GBP, EUR and USD and has provided our clients with another great opportunity to purchase Australian Dollars this morning.
Later this morning at 10.15am, Philip Lowe will address this issue at a televised RBA board dinner in Melbourne where he will likely give further hints towards future RBA plans to tackle the housing concerns. As this is unusually televised, investors will be watching this event keenly and is likely to cause volatility for AUD rates.
For a more detailed forecast for GBP/AUD, get in touch with our currency experts on 01494 725 353 or email me here.
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