AUD GBP Lower Ahead of PMI Data for the UK Economy

GBPAUD rates have seen more gains today as the Pound surprised the market and took a safe haven status. This has driven a lot of further investment into the Pound and as its demand goes up, so does its value. This resulted in gains for the Pound against a basket of markets with SPIKE NOTIFICATIONS going out to a number of clients here who registered for such interest. (To register for this service please email [email protected] with your details)

So will these levels hang around?

My personally view is that there has to be a correction in the near future and then the trend will continue, but I think these highs are towards the top end we will see for the rest of the year.

Why will they drop?

The GBPAUD pairing is affected by a number of factors; the economic strength of both countries, China’s growth and carry trades.  Carry trades is what I think will have an impact on the levels this coming few days.  A carry trade is when financial institutes and central banks move money to higher returning currency. So in this case from the Pound with low interest rates to the Australian Dollar where rates are higher.  This movement of money can artificially change the demand for the currency and therefore its demand.  So with the gains we have seen this last week it seems highly probably there will be some profit taking as positions are sold.  This move could easily create some negative movement back down which is when I would see AUD if I had them this side of the new year.

Why will the trend continue?

Speculation is building that the Reserve Bank of Australia will intervene in the activity to weaken their currency.  This will probably come from a change to their interest rate levels, something that we have seen them do over 25 times while Mr Stevens has been governor. So it is safe to say he is happy making a change quickly.  This could potentially happen as soon as next week when they hold their next interest rate decision but like many central banks, policy change as large as a cut to interest rates are uncommon in the month of December so could be put off until 2014.

If you have exposure to the AUD GBP or any other currency and would like an up to date forecast or live price feel free to contact the Author – Steve Eakins[email protected]

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