Foreign Currency Market Update – GBP / AUD Update
The past week saw the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate rise and fall precipitously, progressing from a low of 2.1631 on Wednesday to a high of 2.1996 on Thursday, although this gain was chiefly due to the external factor of US Federal Reserve officials making highly optimistic statements about a potential rate rise within the year.
The Pound and the Australian Dollar suffered from a distinct data shortage last week, with the bulk of relevant economic publications being released during the early part of the week. The Pound was affected most strongly by Tuesday’s Governmental Borrowing and Public Finances results; in a disappointment to speculators, the Public Sector Net Borrowing figures showed an expansion of the UK debt level above estimates, while the Public Finances result indicated a ‘slight’ reduction of -£0.2bn in August, which was nonetheless unable to offset the detrimental effect of the debt level news.
Most of the week’s Australian results were also out on Tuesday; the Roy Morgan Consumer Confidence Index rose from 105.3 points to 114.5, while the Q2 House Price Index also showed growth in both the quarterly and annual fields.
Other than these scant postings, however, only the UK BBA Loans for House Purchases in August was left to interest investors. The figure came positively, rising from 46315 loans to 46743 loans, although this was still a shortfall on the predicted 47000.
As previously mentioned, the US Fed’s officials had arguably the biggest impact on the pairing last week; Fed Bank of Atlanta President Dennis Lockhart made three highly hawkish speeches in favour of a US interest rate hike before 2016 over Monday, Tuesday and Wednesday. This was followed on Thursday by Fed Chair Janet Yellen, who also voiced her support for a rate hike in either the October or December at the Federal Open Market Committee (FOMC) meetings. This was topped off by support from Fed Presidents James Bullard and Esther George, who although influential, are not actually part of the current FOMC voting committee.
During the current week, Pound Sterling/Australian Dollar exchange rate movement may occur as a result of the UK Mortgage Approvals for August, the US Consumer Confidence Score for September, the UK Finalised Q2 GDP, the Australian Performance of Manufacturing Index for September and the Chinese Manufacturing PMI for September.
The UK Mortgages figure is expected on Tuesday to rise up to 69.8k, while a converse drop is predicted in the US Confidence score on the same day, with movement from 101.5 points to 96 on the cards. With the UK’s revised GDP result, no change is expected from 2.6% on Wednesday. Moving eastwards, the Australian Index has no forecasts assigned to it on Thursday, and as of writing, no change is expected in China’s vital manufacturing PMI for September, which should show any rise or fall in demand for Australia’s iron ore.
In addition, a number of Fed officials are due to make speeches this week and any continuing support for the likelihood of a US interest rate hike is likely to see the ‘Aussie’ depreciate against the Pound.
Heads Up
Summary of major upcoming data releases that we think may move the market.