Australian Dollar News: AUD Firms as Commodity Prices Rise at the End of 2017

GBP/AUD Volatile in Thin Trading Conditions

The Pound to Australian Dollar (GBP/AUD) exchange rate traded in wide range last week as the Pound was left a little directionless due to thin trading volumes in the final week of 2017.

The one UK data release of the week did provide some support for Sterling however, with data showing that annualised mortgage lending had risen 9% in November.

Meanwhile, the Australian Dollar fared a little better in the middle of last week thanks to a strong uptick in commodity prices and the resulting demand for high-yield currencies.

However, AUD failed to cling to these gains at the end of the session as the lift in commodities failed to extend to key Australian exports iron ore and coking coal as reduced demand from Chinese steel mills weighed.

Pound (GBP) Bolstered as Factory Growth Remains Strong in December

After initially slumping against the Australian Dollar at the start of Tuesday’s trading session, the Pound was able to rally on the back of the UK’s latest Manufacturing PMI figures.

According to figures published by IHS Market, the UK factory index dipped from a multi-year high of 58.2 to 56.3 in December, slightly disappointing analysts who had forecast that the index would see a more modest drop to 58.

However investors remained fairly upbeat despite the decline as robust growth in orders, both domestic and overseas, helped the pace of growth remain above the 2017 average of 55.9. This lent support to the GBP/AUD exchange rate.

Rob Dobson, Director at IHS Markit, said;

‘UK manufacturing ended 2017 on a positive footing. Although growth of output and new orders moderated during December, rates of expansion remained comfortably above long-term trend rates.’

‘The sector has therefore broadly maintained its solid boost to broader economic expansion in the fourth quarter.’

However, one area of concern amongst the firms surveyed continued to be rising input costs, which continue to climb due to the decline in the Pound in 2017.

Australian Dollar (AUD) off to a Strong Start in 2018

The Australia Dollar raced higher during the Australasian session, falling just short of striking a new one-month high against the Pound, but starting off 2018 on a strong footing.

The uptick was largely prompted by broad-based weakness in the US Dollar (USD) and rising commodity prices, with the Bloomberg commodity index closing 0.4% higher, marking the 11th consecutive day of gains.

Further supporting AUD this morning was the release of China’s latest manufacturing PMI figures, with an uptick in factory activity boding well for export demand from Australia.

GBP/AUD Forecast: UK Service Sector to Strengthen?

Looking ahead, the GBP/AUD exchange rate may continue to strengthen tomorrow with the publication of the UK’s Construction PMI, which is forecast to have ticked slightly higher last month.

However, more focus is likely to be placed on Wednesday’s Services PMI, with the expected uptick in the UK economy’s largest sector of growth likely to bolster the appeal of Sterling.

Meanwhile, Australia will release its own services PMI overnight on Wednesday, with a possibly uptick in activity likely to help the Australian Dollar to recoup some ground.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard