The AUDGBP exchange rate was trading at its lowest level for 2021 on Thursday but the pair has bounced 0.36% on Friday morning. The Aussie versus the pound closed at 0.5521, which was the lowest level since early-December 2020.
AUDGBP trades at 0.5537 after the Australian currency was able to bounce back from the losses.
Iron Ore and NZ Housing Weigh on Aussie
The Australian dollar has been trading lower after it saw weakness in iron ore prices. Ore exports to China were down due to the New Year season and total exports to China saw a 2% drop on the same period a year ago. Commodity prices have helped to support the Aussie into 2021 but the market is cooling slightly after a good run for exports.
Traders are also concerned about recent policy changes to housing in New Zealand and there are fears that they could be copied in Australia. The New Zealand government announced plans to restrict tax breaks for property investors and it will also set up a fund to boost the availability of sustainable housing projects for locals. The low interest rate environment has seen demand surge for NZ housing and the same trend has seen Australian house prices and lending moving sharply higher. The Reserve Bank of Australia has made it clear that it will not raise rates until 2023 at the earliest and this has given investors a green light to bid up the property market.
The RBA will likely have to address the property issue at the next policy meeting, if they do not make any comments before then.
Analysis from Citigroup has added to the belief that Australian pay levels will increase due to the lack of immigration.
Pound Supported by Jobs
This week saw the pound supported by economic data with the unemployment rate dropping to 5% in the UK and PMI indices for manufacturing and services coming in strongly as businesses anticipate the reopening. The UK’s services sector is said to be preparing for a “summer of spending” as consumers are freed from recent restrictions with a record amount of savings.
Hospitality businesses hired new staff in preparation for the reopening, which saw the first monthly rise in UK employment since the start of the pandemic. UK travel companies were also set to benefit but this has likely been hurt by the new fines being implemented on citizens who attempt to leave the country without a valid reason. The earliest date that England can take a holiday abroad is said to be the 17th of May.
AUDGBP is still stuck in a trading range between 0.55 – 0.5600 but the pound came close to testing the support and could move lower if the reopening trend continues. The Aussie dollar will also be at risk from US inflation figures today as a rise in prices could see bonds move higher again and hurt riskier assets.
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