Aus and NZ Dollar to Pound Sterling: GBP Exchange Rates Recover as UK Heads Towards Interest Rate Rise

At the time of this article's latest update the following levels are noted:

• The pound to Australian dollar exchange rate (GBP/AUD) is 0.08 pct higher at 1.7886.
• The pound to New Zealand dollar exchange rate (GBP/NZD) is 0.08 pct down at 1.9806.

If you are holding out for better exchange rates then don't hesistate, ensure your FX provider has the relevant buy order in place for when your rate is achieved. Likewise, if there is a threshold you are not willing to cross to the downside ensure stop-loss orders are in place. Please learn more here.

British Pound Higher vs AUD & NZD on BoE Minutes

What is important for the pound right now?

Simply put - interest rates and when they will be lifted by the Bank of England.

It is for this reason markets were watching the release of the minutes from the August meeting on Wednesday.

"The release of BoE minutes sent GBP soaring in morning London trade today after they revealed a surprisingly hawkish bent with two MPC members voting for a rate hike. The 2-7 vote shocked the currency market with consensus expecting the BoE to remain at 0-9," says Boris Schlossberg at BK Asset Management.

Inflation figures send GBP Lower

As mentioned the latest inflation figures really hurt sterling. When inflation falls there is little need to raise interest rates, and the pound suffers. Another economic indicator to watch is wage growth; when wages aren't growing - as is the case - there is little need to raise interest rates.

Markets are selling the pound as they begin to realise they may have been a little optimistic in thinking the Bank would be forced to raise rates as early as the end of 2014.

The problem for forex watchers is that markets seem to be reacting to every word uttered by the Bank of England's Governor Mark Carney at present. This is all creating a rather volatile environment for FX markets which is incredibly difficult to call.

GBP/AUD Recovery at Play, AUD Predicted to Stay Volatile

The GBP/AUD had a good start to the week when the Aussie dollar was hit by news that seasonally adjusted new motor vehicle sales in Australia dropped by 0.4%, on an annual basis in July. This was a big improvement on the recorded drop of 2.0% in the previous month.

There was some mixed data out of China earlier as business sentiment advanced slightly on the previous month but foreign direct investment into China, for the first half of the year, fell 0.35% on the year.

"With uncertainty still surrounding the Australian economy, we expect to continue seeing added volatility across Australian dollar markets in the near term," says Kamil Amin at Caxton FX. "With sterling having suffered heavy losses last week, we expect to see some form of a recovery come into play any time soon."

GBP/NZD Ticking Upwards Towards 2.0

Could we be about to witness the pound to NZ dollar hit the round figure of 2.0 once more?

The current near-term trajectory suggests this target is certainly achievable despite the recent woes experienced by the pound, which tells us a lot about the state of the NZD at present!

However, be aware that such round figures often form significan resistance levels and further gains could be capped here.

"Uncertainty surrounding the price of dairy products appears to be weighing in on the New Zealand dollar, with prices having fallen to their lowest level since October 2012 in the last auction. With the release of New Zealand inflation expectations early in tomorrow's morning session, we should see some significant price action upon release," says Amin.