Foreign Currency Market Update – GBP / AUD Update
Over the past month, the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trending within the range of 0.4547 to 0.4797.
In general, the Australian Dollar has spent the last few weeks advancing on its major peers. This is due to a combination of factors, but it’s primarily the result of a bearish US Dollar. With several US ecostats producing less-than-ideal results, and with the Federal Open Market Committee (FOMC) displaying a cautious policy outlook amid fears of a global economic slowdown, several traders have been forced to delay bets regarding the timing of a Federal Reserve benchmark rate increase. The longer the North American central bank holds accommodative policy, the better for the Australian economy.
In addition to delayed Fed rate hike bets, the Australian Dollar has found support from slowly recovering commodity prices. As stock markets around the globe respond to stability in China’s Shanghai Composite Index, commodity prices gained significantly. This saw heightened demand for the Oceanic currency amid speculation of vastly improved trade. Stability in China is also important for improving market sentiment.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate edged higher by around 0.1% during Monday’s European session.
The Australian asset is holding a position of strength versus its major peers during Monday’s European session after China’s equity market ended the Asian session at a seven-week high. Global stocks also remain on the upside after the ninth consecutive day of gains. Additional ‘Aussie’ appreciation can be attributed to ongoing speculation that the FOMC will continue to hold the benchmark interest rate all the while the global economy struggles to show robust growth.
Australian economic data had minimal impact during the Australasian session, so ‘Aussie’ movement will be subject to US Dollar positioning and market sentiment. Later during the North American session there will be several speeches from Fed officials. If the speeches prove hawkish in tone, the Australian Dollar may decline versus its major peers.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trending in the region of 0.4791 during Monday’s European session.
Looking ahead, there is a distinct possibility that the Australian Dollar will soften. This is because the recent appreciation may present problems for the Reserve Bank of Australia (RBA), who previously intervened in order to devalue the domestic asset. With fewer tools at his disposal, RBA Governor Glenn Stevens may attempt to talk down the ‘Aussie’ in the hopes of avoiding another rate cut which could stoke the housing bubble.
However, with risk sentiment improving as it becomes more apparent that the Fed will not tighten monetary policy this year, demand for the Australian Dollar will make devaluation without intervention a struggle. This will be especially true if it transpires that there is greater stability in the Far East and commodity prices continue to advance.
In terms of domestic data, there will be several influential publications over the coming week with the potential to provoke ‘Aussie’ movement. Perhaps the most significant of which will be Thursday’s labour market data. However, Australian data results may possibly be overshadowed by US Dollar movement and changes in risk-appetite.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trending within the range of 0.4766 to 0.4798 during Monday’s European session.
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