Foreign Currency Market Update – GBP / AUD Update
The GBP/AUD exchange rate has been trending between 2.1039 and 2.0696 over the past week.
Pound Sterling was weakened last Tuesday by more dovish comments from Bank of England (BoE) Monetary Policy Committee (MPC) members. Much of the focus was on Chief Economist Andy Haldane, who caused a stir with a ‘thought experiment’ which suggested that cash could be abolished in order to impose negative interest rates. Unsurprisingly, comments by MPC doves saw Pound Sterling soften and the Australian Dollar advance.
George Osborne, Chancellor of the Exchequer, gave his Autumn Statement on Wednesday and GBP/AUD pushed back as, on the face of it, the spending measures announced were less severe than anticipated. The Australian Dollar was also left weak after a US data glut that was dominated by the strong performance of Durable Goods Orders, which rose from -0.8% to 3.0% and supported US rate hike expectations.
The GBP/AUD exchange rate had recovered to 2.0842 by the end of Wednesday.
The fallout from several days of strong US data, with little on the Australian side of things to lend the ‘Aussie’ strength, continued into the weekend. The Australian Dollar was kept from severe losses as investors began to pick apart the details of George Osborne’s Autumn Statement, revealing several key concerns regarding the UK economy. With both currencies weak, trading for the GBP/AUD pairing was volatile during Thursday and Friday.
A break for the American market over the Thanksgiving holiday on Thursday also spared the Australian Dollar from the full effect of the strong round of US data released earlier in the week. Investors began this week cautious ahead of more big data – this time the US Non-Farm Payrolls due out on Friday – which could spark a bullish run for the US Dollar if it repeats last month’s stellar performance. The lull in activity allowed the ‘Aussie’ to make strong advances on Pound Sterling.
The GBP/AUD exchange rate fell from 2.0900 to 2.0764 during yesterday’s London session.
The Australian Dollar has continued its bullish run today following the Reserve Bank of Australia’s (RBA) decision to leave interest rates on hold at 2.00%. While Australia continues to feel the effects of slumping iron ore and copper prices, the RBA’s refusal to cut interest rates demonstrates their confidence in the ability of the economy to withstand global conditions.
The Pound Sterling, meanwhile, was weakened by a worse-than-expected UK Markit Manufacturing PMI, which dropped past the forecast level to 52.7.
Australian Gross Domestic Product figures will be released on Wednesday during the Oceanic session and are expected to show an expansion in output from 2.0% to 2.3%. Thursday sees the ECB make its interest rate decision and Fed chairwoman Janet Yellen deliver a speech. Both could help clear up trader uncertainty and see investors move away from high-risk assets like the Australian Dollar.
The GBP/AUD exchange rate has slumped to a five-month low of 2.0690 today, with the bullish Australian Dollar up 0.6% against Pound Sterling.
Heads Up
Summary of major upcoming data releases that we think may move the market.