Pound Tumbles against Australian Dollar as UK Economic Outlook Dampens

Pound Tumbles against Australian Dollar as UK Economic Outlook Dampens

The Reserve Bank of Australia (RBA) kept monetary policy on hold Tuesday, a decision that was widely anticipated by the financial markets. Interest rates are not going anywhere soon.

Lowe did, however, point to low wage growth and high household debt as causes for concern, claiming that they will likely constrain future spending growth.

Mortgage Choice CEO John Flavell said the RBA's decision was "unsurprising" due to the stance indicated in the August board meeting which said that an extended period of stability would continue to drive growth in the economy.

The board of the Reserve Bank of Australia has elected to keep the cash rate on hold at 1.50 per cent at its September meeting. Policymakers worry that cutting interest rates might add fuel to already hot house prices and fan growth in debt levels.

These figures showed that the Australian economy remains in good shape, according to Craig James, chief economist at the Commonwealth Bank of Australia who told Xinhua that the positive outlook on the economy from the RBA has been "vindicated".

Governor Philip Lowe said he'd done that despite the fact that there is some light appearing on the economic horizon.

The recent data have been consistent with the RBA's expectation that growth in the Australian economy will gradually pick up over the coming year.

Yet the volume of exports sold rebounded in the quarter to add 0.3 percentage points to GDP growth, when most analysts had expected a small subtraction.

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"The outlook for non-mining investment has improved recently and reported business conditions are at a high level".

"This is likely to continue for a while yet, although stronger conditions in the labour market should see some lift in wages growth over time", it said.

The recent Euro to Australian Dollar weakness may persist in the near-term, when Wednesday brings a measure of Eurozone retail activity as well as Australian GDP figures. This was especially possible thanks to higher rates for investment and interest only borrowers which were contributing to the market slowdown.

The Dollar was down another 0.28% against the Yen at the time of the report, as risk aversion continued to plague the markets, with no clear action plan announced overnight.

The Australian Dollar has been the clearly dominant currency today, having been supported by an optimistic outlook from the Reserve Bank of Australia (RBA).

In the coming week, Pound trade could be influenced by July's United Kingdom trade deficit update due Friday and August's United Kingdom inflation rate next Tuesday.

Most economists expect the official cash rate will remain steady until the second half of 2018, although a spike in electricity prices this quarter might push the annual inflation rate as high as 2.5 per cent when the numbers are released next month.

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