Uncertainty Over Global Recovery

Bank of Australia left interest rates on hold

Uncertainty over global economic recovery
Sterling is victim of increased risk aversion


The Reserve Bank of Australia has left interest rates unchanged at 3%, reassuring the market of its current position in regards to the monetary policy, which involves contributing to sustainable growth and low inflation. Australia outperformed other G10 countries in Q1 as the GDP grew 0.4% q/q. Current trends suggests that the positive tone will continue on Q2.

Markets remain with doubts about a global economic recovery and about whether the optimism in recent months may have been overdone. Caution is expected ahead the G8 summit which will begin on Wednesday and which is maintaining the currency pairs trading on very narrow ranges.

Sterling has suffered with the increased risk aversion and on speculation that the Bank of England will announce on Thursday the extension of its QE programme, beyond the current 125 billion pound target. The focus today will be on May's Industrial Production Data, which is expected to show a further rebound in activity.