Foreign Currency Market Update – GBP / AUD Update
The past week has seen the Pound Sterling to Australian Dollar exchange rate trending within the range of 2.1147 to 2.1587.
Last week the GBP/AUD exchange rate dived considerably in the wake of ‘Super Thursday’ which saw the Bank of England (BoE) interest rate decision accompanied by the publication of meeting minutes and the quarterly inflation report. The Monetary Policy Committee (MPC) voted 8-1 in favour of holding the cash rate; citing rocky global economic conditions and weak consumer prices as the principle concerns preventing an immediate cash rate increase. Of particular detriment to demand for the Pound, however, was the BoE quarterly inflation report which showed that the BoE slashed growth forecasts for 2015 and 2016 and predict that inflation would remain well below target throughout 2016.
However, as the weekend drew closer the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate recovered losses following an unexpectedly positive result from US Non-Farm Payrolls. The robust figure supported hopes that the Federal Reserve would hike the cash rate in December, resulting in a significant US Dollar uptrend. The ‘Aussie’ (AUD) dived in response to US Dollar strength amid speculation that the first USD rate hike in a very long time will see dampened demand for the high-yielding Oceanic currency. Improved Fed bets also supported Sterling gains given that many traders predict that the BoE will want to follow closely on from a Fed rate increase.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate softened by around -0.2% during Tuesday’s European session.
Despite the fact that Chinese Consumer Prices failed to meet with expectations during Tuesday’s Asian session, the Australian Dollar edged higher versus many of its currency peers during the European session. This is likely to be the result of concerns that the deteriorating health of the global economy may cause the Federal Open Market Committee (FOMC) to delay a cash rate increase beyond December. US Dollar overvaluation is also another key concern that may prevent a 2015 Fed rate hike. A much better-than-expected Australian Home Loans result also aided ‘Aussie’ gains on Tuesday amid hopes that accommodative policy has eased restrictions on bank’s lending conditions which could potentially reduce the housing bubble. The GBP/AUD exchange rate declined on Tuesday also as a result of weak British retail sales in October.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trending in the region of 2.1415 during Tuesday’s European session.
Looking ahead there will be a number of ecostats with the potential to provoke GBP/AUD volatility. On Wednesday China’s Retail Sales, Industrial Production and Fixed Assets ex Rural data publications will all have an impact on the Australian Dollar. Meanwhile, Wednesday’s British jobs data will be very important to ascertain whether labour market conditions continue to improve. Should this be the case it will pressurise the BoE into hiking the overnight cash rate ahead of current expectations and cause the GBP/AUD conversion rate to rally. Thursday’s Australian Employment Change and Unemployment Rate will be very likely to spark ‘Aussie’ changes. For the rest of the week, a lack of influential British and Australian data will likely see GBP/AUD changes in response to US Dollar positioning.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trending within the range of 2.1376 to 2.1466 during Tuesday’s European session.
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