GBP/AUD rates have dipped during Wednesday’s trading, with the pair heading back under 1.83 on the exchange. GBP/AUD rates have remained range bound recently, fluctuating between 1.80-1.85. Improved Chinese economic data helped to steady any further AUD loses against GBP, following a very poor run which saw rates move from 1.70, right up to 1.83-1.84 in a short space of time.
This move was a clear reminder of how aggressive and quickly the currency markets can move and whilst I don’t expect Sterling’s momentum to continue at that pace, the AUD may struggle to make any significant inroads, unless there is a shift in market conditions.
It will be interesting to see the market reaction to tonight’s speech by Reserve Bank of Australia (RBA) governor Glen Stevens, along with Australian Business Confidence figures released overnight.
Personally I would be very tempted to take advantage of the current levels as any dip in the UK recovery, or indication that the Bank of England (BoE) may hold back an interest rate hike, we aere likely to see the AUD realign towards 1.75.
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How will the Aussie fare with both US inflation tomorrow and Glenn Stevens speech tomorrow night? Sterling Aussie rates have enjoyed somewhat of a see-saw relationship over the previous few months pivoting above and below the early 1.80’s. Today the Aussie has been clawing ground back so depending on how strong the US figures are, and what comments Stevens makes, we could see quite a lot of volatility.
The RBA seem fairly set on holding interest rates as they are, but they are obviously still concerned about the strength of the AUD impacting on exports. There is always a danger that at some point the RBA will look to artificially weaken the currency either through selling fx reserves or some other form of intervention. If this is the case then there could be a sharp drop in the value of the currency- whilst I am not anticipating any action imminently it is still a concern.
The Bank of England minutes are also published tomorrow morning but I am not expecting any huge variation from this- I can’t see how any more members will have voted to raise interest rates given UK data has been tailing off lately and the Chief Economist for the BofE has expressed his concern over hiking rates too soon because the economic outlook presently is quite different from just 3 months ago. If anything there is probably more chance of one of the 2 who voted to hike changing their mind then another member joining them in the call to raise interest rates sooner. If this was the case we could see substantial GBP weakness but again I think this scenario is unlikely.
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We saw a flurry of economic data released overnight which only had a minor impact on Australian Dollar exchange rates. Chinese growth figures came out a little better than expected yet Retail Sales and Urban Investment had dropped which in the end virtually cancelled each other out.
As I write this Governor Stevens of the RBA is currently speaking on the Australian economy so expect an update on what he has said on the site a little later on. The real surprise is that although he has said on a number of occasions that he feels that the Australian Dollar is overvalued and is starting to hurt the Australian economy we have not seen a huge amount done about it and the Australian Dollar still seems to be standing strong.
Personally I still feel that we will break the 2 level for GBP-AUD but now that U.K interest rate hikes appear to have been pushed back to the middle of 2015 this may not happen until after the elections in April assuming that UKIP don’t make a charge in the coming months, leading to political uncertainty and a very fragile Pound. We did see this happen during the Scottish independence vote as we homed in on a result and it started to hang in the balance the Pound dropped like a stone.
If you have Australian Dollars to buy or indeed sell then it may be prudent to get in touch with me directly. The company I work for has won awards for our exchange rates against all other major brokers based in the U.K and Australia and I would be confident I can beat any level you are offered by your current provider.
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Sterling has regained its recent falls against the Aussie Dollar a fortnight ago as the Chinese announced on Wednesday a big fall in inflation.
Indeed, the figure was the lowest level in almost five years causing worry for the economy down under. The reason why this could impact the Australian Dollar exchange rate is because China is the biggest trade partner for the country and any signs of a slowdown is likely to cause a negative effect on the AUD.
With fears of a global slowdown this often causes investors to sell off riskier currencies including the AUD, NZD & ZAR so I think we could see the AUD start the week off with a fall against the Pound.
The Reserve Bank of Australia publishes its minutes on Tuesday and with Chinese GDP also due out I expect to see a huge amount of volatility over the next few days for the Australian Dollar. Expectations for Chinese GDP are for growth of 7.2% so anything lower could see the Australian Dollar weaken.
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GBP/AUD rates have remained very flat during Friday’s trading, following a volatile couple of weeks for the currency pair. Rates are floating between 1.83-1.84 on the exchange and I believe Sterling will continue to find support above 1.80 in the short-term.
The AUD had started to make inroads following a difficult run against Sterling but mixed economic data from China has caused uncertainty within the markets. We did hear of a slowdown in Chinese economic growth, which seems to have stunted the AUD’s recent momentum. However, only a couple of weeks ago we were hearing the opposite and this gave the AUD a boost in the short-term. Due to China’s size we will often get contrasting views and data releases but overall I believe the Reserve Bank of Australia’s commitment to lowering the value of the AUD and the likelihood that we will see a UK interest rate hike sooner than we will see one in Australia, should help to keep GBP/AUD rates above 1.75 for some time.
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With UK inflation dropping earlier in the week, and US retail figures showing a surprising drop and suggesting the Fed may still be a little way off a rate hike, the Aussie has managed to climb against sterling. Some of the sheen has been taken off the pound of late due to mixed data and a suggestion that UK interest rates won’t go up until later in 2015 causing sterling to slip. Despite UK unemployment falling again to under 2 million for the first time since 2008, average earnings increases are still below the rate of inflation which is another concern.
At the same time, whilst the RBA have been concerned by the strength of the Aussie, it doesn’t look like they will be changing interest rates in either direction giving the Aussie quite a bit of support. However there is always a risk that given the concerns over global growth and inflation rates, the RBA may look at other measures to weaken the Aussie and boost exports rather than touching interest rates. This could take the form of selling fx reserves or other measures – central banks have done this for years and you only have to look at the Swiss National Bank and Japan for recent examples of this and saw the Swiss Franc and Yen plummet.
Overnight the Aussie did slip back giving up some of its gains partly due to consumer inflation expectations, but more so profit taking on such a big move on a currency that has traded within fairly set parameters over the last few months.
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