Foreign Currency Market Update – GBP / AUD Update
The past week saw the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate tumble from an over six-year high of 2.1466 to a low of 2.0873, although the Pound has since gained against the Australian Dollar amid ongoing commodity concerns.
Last week, the Pound experienced a mixed run of performance, seeing a promising start on Monday being crushed by the economic let-down that was ‘Super Thursday’. The Pound reached its high point on Monday after the UK Markit Manufacturing PMI saw an increase from 51.4 points up to 51.9; shortly after this, the GBP/AUD pairing rose to 2.1466. This rise was aided by the positive US yearly Personal Consumption Expenditure Core figure for June. By reporting an above-estimate figure, hope was renewed for a Federal Reserve interest rate increase, and the value of the US Dollar rose, devaluing the ‘Aussie’ considerably.
This was a brief high in a week of plunging lows, however; the next day, the Reserve Bank of Australia (RBA) voted to freeze the interest rate at 2%, which sparked optimistic speculation that no more cuts to the cash rate would occur this year. This announcement, coupled with positive Australian Retail Sales figures, saw the Australian Dollar’s value grow exponentially. Conversely, the Pound dipped downwards, posting 2.1023.
Although Wednesday didn’t bring any cause for celebration with the UK data (a pair of declines in the UK Services and Composite PMIs for July), the US ISM Non-Manufacturing Composite for June saw the ‘Aussie’ decline significantly as the US result was a figure of 60.3, 4.1 points higher than forecast. This sent the Pound back up against the Australian Dollar, seeing a conversion rate of 2.1333.
The Pound continued to hold its advantage early on Thursday, despite the Australian Employment Change figure for July showing a 38.5k person increase. This was due to a 0.2% rise in the July Unemployment Rate, up to 6.3%. However, Thursday was undeniably the worst day for the Pound last week as later in the day, an underwhelming result from the Bank of England (BoE) Monetary Policy Committee (MPC) saw little support for a UK interest rate hike and consequently the Pound dived to 2.1103 against the ‘Aussie’. A shortfall below expectations in the US Change in Non-Farm Payrolls figure for July also strengthened the Australian Dollar against the Pound, as the dip once again lowered expectations of an interest rate hike.
This week, Pound Sterling/Australian Dollar exchange rate movement may occur as a result of the Australian Westpac Consumer Confidence Index for August, the Chinese yearly Industrial Production figure for July, the UK Employment Change figure for 3 months to the end of June, and the US Advance Retail Sales figure for July. Forecasts have been mixed for the Westpac result, but if Chinese Industrial Production indicates a slowdown, the ‘Aussie’ will surely be devalued against the Pound (as well as other currencies). The UK Employment Change figure is forecast for a further -55K loss of employed persons, but predictions are optimistic for the US Advance Retail Sales results, with a 0.6% increase over the previous total. Should this exceed expectations, the US Dollar is highly likely to uptrend, and by extension, the ‘Aussie’ will soften, potentially improving the Pound to Australian Dollar exchange rate.
Heads Up
Summary of major upcoming data releases that we think may move the market.