The Australian dollar gained on the British pound on Thursday as investors braced for a Bank of England meeting later in the session where it is widely expected to cut rates for the first time since 2009. Sterling slipped a modest 0.22 percent on the Aussie to A$1.7514, but dealers suspect it could fall much further should the BoE take the sort of aggressive action some have called for.
The pound has been trading in a relatively tight range against the Aussie since Britain's vote to leave the European Union, when it shed 6 percent in a single day. The Australian dollar fell briefly following the data but was up 0.3 percent to $0.7589 in afternoon trading.
The New Zealand dollar inched higher on Thursday as investors took a breather after recent falls. The currency slipped from a $0.7257 early in the week on speculation the Reserve Bank of New Zealand might surprise at its policy meeting next week. New Zealand government bonds gained, sending yields 2 basis points lower at the long end of the curve. Australian government bond futures eased, with the three-year bond contract down 2 ticks at 98.590. The 10-year contract was down 3.5 ticks at 98.020.
Money markets have fully priced in a quarter-point cut to the BoE's main interest rate but there is uncertainty on what else it might do, including asset buying or promising further easing. It may even adopt a negative interest rate policy. Closer to home, the Aussie shrugged off disappointing retail sales data which only underscored the conditions that prompted the Reserve Bank of Australia (RBA) to cut rates earlier this week. Retail sales rose just 0.1 percent in June, well short of forecasts of a 0.4 percent increase.