Australian dollar makes small gains

The Australian dollar made small gains against sterling yesterday, as a rally in stocks helped soothe investors’ nerves. The minutes from the RBA's last meeting, released yesterday, revealed that the decision to cut rates was a close one and that any further reductions are likely to be done in small increments. Meanwhile, UK inflation data gave sterling a small positive, as CPI data indicated the economy had not yet fallen into deflation. Investor focus today will be largely on a raft of UK data, including the BoE Minutes, culminating in the release of the government’s annual budget. The budget is likely to be the gloomiest in a generation, with analysts warning the government will likely forecast an economic contraction of around 3-3.5 percent for this year. The budget deficit is also likely to near 12 percent of GDP, its highest level since WW2. Investors will remain reluctant to take on large positions ahead of this news, with other key data, such as retail sales, released in the coming days. A series of poor results may put even more pressure on the pound.