Foreign Currency Market Update – GBP / AUD Update
Over the past week, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trending in the range of 1.9862 – 2.0158.
A combination of US Dollar changes and schizophrenic market sentiment has seen the Australian Dollar fluctuate considerably over the past week. Mixed results from domestic and Chinese data also added to the mix. However, in general the Australian Dollar softened towards the tail-end of last week, with the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate hitting a 71month high on Friday. The depreciation was the result of speculation that the Reserve Bank of Australia (RBA) will intervene in the market in order to devalue the South Pacific asset. However, this could be problematic with the Sydney housing bubble continuing to inflate and showing no sign of a reversal, despite the stricter rules on lenders implemented recently.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trending within a narrow range on Monday despite dampened market sentiment and a slightly stronger US Dollar. Although British economic data printed positively on Monday, the Pound is struggling against last week’s news that Standard and Poor’s put the UK’s AAA credit rating on negative outlook. The Australian Dollar, meanwhile, is unlikely to make any significant gains as the situation in Greece is weighing on market sentiment. The European Union openly admitted that they were preparing for a Greek exit from the Eurozone. Greek Prime Minister Alexis Tsipras’ optimism is wearing thin with traders, especially considering the lack of progress made since the discussions began.
US Dollar movement is likely to impact upon the Australian Dollar on Monday and throughout the coming week. In general, if the US Dollar advances the ‘Aussie’ (AUD) dives as demand for high-yielding assets cools. Although US data has printed comparatively positively of late, there are concerns that overvaluation will become a serious economic stumbling block. Should the US Dollar soften after US economic data is published on Monday afternoon, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is likely to soften in response.
Over the coming week there will be several influential economic publications with the potential to provoke changes for the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate. Perhaps most significant of said publications will be the British Consumer Price Index. After the UK fell into deflation territory in April, Bank of England (BoE) officials stated that it was only temporary and wouldn’t have a long-term impact. If UK inflation moves back into positive territory the Pound is likely to advance considerably. Conversely, if inflation remains negative, Sterling will slump. Australian economic data will be a little less impactful over the coming week. However, one important publication will be Minutes from the RBA’s most recent policy meeting. With a high likelihood that the report will read dovishly, the ‘Aussie’ is likely to soften. In addition, the Federal Open Market Committee (FOMC) meeting to decide on interest rates will impact upon the GBP/AUD pairing. If Federal Reserve policymakers opt to keep the cash rate on hold at 0.25%, as most analysts predict, and the accompanying statements are dovish with regards to the timing of a liftoff; the Australian Dollar will strengthen.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trending in the region of 2.0118 during Monday’s European session.
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Summary of major upcoming data releases that we think may move the market.