Today's insight: GBP/AUD and GBP/NZD at multi-year highs | Bank of Canada rate cut expected

GBP/AUD and GBP/NZD at multi-year highs after dovish RBA

Both Australasian dollars have been weakening for the last few days after the Reserve Bank of Australia's meeting. Whilst the RBA decided not to cut their base rate, the tone of their press conference and statement was notably dovish and the markets have started to price in interest rate cuts in the new year. We've also seen very mixed data from China, which is heavily influential in the Asian and Australasian regions and particularly in the commodities markets; markets that heavily influence the value of both the Aussie and the Kiwi Dollar. As at this morning, in the interbank market, the GBP/AUD rate is up to AUD 2.0050 and GBP/NZD is around NZD 2.2060. It has been 4 1/2 years since we've seen that sort of level on the Australian dollar and you have to go all the way back to early 2016 to find the last time GBP/NZD was this high. For Kiwi buyers, the sun is shining and there is hay to be made.

Bank of Canada rate cut expected

In their last meeting of the year, the Bank of Canada Monetary Policy Committee is expected to cut the base rate from 3.75% to 3.25%, the lowest in 26 months. There seems very little reason not to cut the base rate; having peaked at 8.1% in June 2022, the consumer price inflation index is down to within the Bank of Canada's range at 2.5%. The BOC must be concerned about the unemployment rate, which bottomed out in June 2022 at 4.9% but had risen to 6.8% in November, the highest level in more than three years. Whilst an interest rate cut won't be a panacea for all the Canadian economy’s ills, it would, at least make life a tad more affordable for consumers and businesses across Canada. The BOC is widely criticised for not acting soon enough or aggressively enough. In the interbank market, the GBP/CAD exchange rate spiked to CAD 1.8115 yesterday but slipped to CAD 1.8060 on profit-taking ahead of the BOC announcement. ?Where it heads after that will depend on the tone and detail of the BOC statement.

Today's Major Economic Releases

00:30 AUD Employment Change s.a.?(Nov)?

00:30 AUD Unemployment Rate s.a.?(Nov)?

08:30 CHF SNB Interest Rate Decision?

08:30 CHF SNB Monetary Policy Assessment?

09:00 CHF SNB Press Conference?

13:15 EUR ECB Main Refinancing Operations Rate?

13:15 EUR ECB Monetary Policy Statement?

13:15 EUR ECB Rate On Deposit Facility?

13:30 USD Producer Price Index ex Food & Energy (YoY)?(Nov)?

13:45 EUR ECB Press Conference?

23:50 JPY Tankan Large Manufacturing Index?(Q4)?

Interbank Exchange Rates