Foreign Currency Market Update – GBP / AUD Update
Over the past week, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trending within the range of 2.1239 to 2.1527.
In a comparatively volatile week amid geopolitical uncertainty in Greece and an economic slowdown in China, the Australian Dollar fluctuated versus its currency rivals. A general depreciation can be linked to the combination of weak trader risk sentiment and tanking commodity prices. Of particular detriment to demand for the ‘Aussie’ (AUD) has been the slowdown in iron ore prices as demand from China tapers.
Its South Pacific rival the British Pound also fluctuated considerably over the course of last week in response to varied UK data results. Whilst Gross Domestic Product data showed British growth met with market projections, Consumer Confidence dived beyond expectations. The mixed data results over the past week have added to uncertainties regarding the Bank of England’s (BoE) policy outlook, with traders unsure as to the timing of a benchmark interest rate hike.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate advanced by around 0.5% on Monday morning.
At the beginning of this week, the South Pacific asset dived versus its currency rivals in response to disappointing manufacturing output from China. Even the fact that Australian manufacturing managed to move from contraction into growth territory and New Home Sales increased by 0.5% wasn’t enough to prevent ‘Aussie’ losses. However, this AUD tanking will actually be viewed as a positive by the Reserve Bank of Australia (RBA). Given that the central bank is sighting overvaluation as one of the biggest stumbling blocks to economic growth, the fact that the Australian Dollar is declining despite positive domestic ecostats is the best case scenario for the RBA.
The British asset, meanwhile, advanced versus many of its currency rivals after manufacturing data bettered estimates. Sterling’s early gains can be linked to a report from EY Item Club which showed bank lending to businesses is set to rise this year for the first time since 2008. The report also stated that mortgage lending is predicted to rise at an average of 3.8% annually until 2019, which is close to pre crisis levels.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate dropped to a low of 2.1352 during the early stages of Monday’s European session.
Looking ahead, there will be several significant ecostats with the potential to provoke changes for the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate. The forthcoming RBA interest rate decision, due to be made during Tuesday’s Australasian session, is a hotly contested subject among traders. Whilst many are certain that the central bank will hold the cash rate to give previous easing a chance to take hold, others are less convinced. Crashing commodity prices and a slowdown in China are likely to have a significant impact on Australian exports so the central bank may feel action now could prevent a larger problem later down the line. Australian Employment Change and Unemployment Rate data will also be of significance for those invested in the Oceanic asset over the course of this week.
In terms of British data, the Bank of England interest rate decision will be of interest to those trading with the Pound. Although very few foresee a surprise rate hike at this juncture, the accompanying quarterly inflation report is very likely to provoke Sterling volatility. Given that consumer prices have fallen to lows bordering on deflation, the institution’s predictions regarding inflation will have a greater impact on future policy meetings.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate climbed to a high of 2.1469 during the early stages of Monday’s European session.
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