- Sterling in the pits after BoE rate cut – First time in 7 years, lowest ever rate
- Australian Dollar powers ahead on Chinese demand – Predictions rise for sustained iron ore exports
- Uncertain future for post-cut Pound – Continued weakness seen after historic rate cut
The Pound has tumbled dramatically against its rivals lately, with large losses being seen against all peers, including the Australian Dollar. In this particular rate (GBP AUD), a drop to 1.72 has been seen.
The source of this abysmal performance has been the Bank of England (BoE), which has cut the UK’s interest rate from 0.5% to 0.25%, the first such cut in 7 years and the lowest rate since the bank opened in the 17th Century.
The Australian Dollar has been in high demand by comparison, with predictions of a long-term import of Australian iron ore for the production of Chinese steel keeping confidence in the Australian economy buoyant.
The last day of the week will only bring the Halifax house price indices for the UK, while Australia will contribute the more impactful decline-predicted AIG construction index for July, as well as the RBA statement on monetary policy.
(Last updated August 4th, 2016)
On the morning of a potential crash in the Pound’s value, the UK currency has already been in a state of decline in most of its regular exchange rates, especially against the Australian Dollar, where a slide of -0.4% has been seen.
Political figures and economists alike have been weighing in on the possible outcome of the BoE interest rate decision, with Shadow Chancellor of the Exchequer John McDonnell stating;
‘I think they need to do something. A small cut is almost inevitable’.
The Australian Dollar has been in high demand so far today, although the latest domestic data has not been that supportive. This has consisted of the June retail sales result, which has shown a drop from 0.2% to 0.1%.
As mentioned above, the Bank of England is set to decide the UK’s interest rate at noon today; the current consensus is that six out of nine monetary policy committee (MPC) members will favour a cut from 0.5% to 0.25%.
(Last updated August 3rd 2016, 14:00)
The Pound has been a mixed option against its peers of late, having made irregular movements in the wake of a third consecutive drop in UK PMI printings. The services PMI for July fell in its finalised form, although this was in line with forecasts and had largely been priced in beforehand.
The Pound managed an unusual rally after the news arrived, though given the UK data that is still to come, it is unsurprising that this positivity quickly faded away.
The Australian Dollar has been low overall of late, having slumped against an increasingly powerful US Dollar. Domestic data out of Australia has actually been positive, with the AIG services index for July rising from 51.3 to 53.9.
Looking ahead, the highly-impactful BoE interest rate decision is due at noon tomorrow; odds are that the central bank will cut the UK interest rate, though as this has been widely forecast, it remains to be seen if a cut will actually devalue the Pound by any great amount. Australia will bring June’s monthly retail sales result early tomorrow; this is expected to reprint at 0.2%.
(Last updated August 2nd, 2016)
The Pound has continued to be an undesirable option against its peers lately, having suffered through another round of contracting construction in the UK.
The Australian Dollar has been a relatively stable prospect by comparison, having had time since the Reserve Bank of Australia (RBA) interest rate cut to recover in exchange rates.
UK Economic News: Pound Sterling’s Appeal Damaged by Further Reduction in UK Construction PMI
The Pound has been an unstable option against the Australian Dollar recently. Although gains have been seen against a number of rivals, the actual faring in exchange rates is poor compared to the best movements seen during the previous week.
The source of this continued disappointment for investors in the Pound has been the result of further July PMI results for the UK, this time concerning construction.
While the sector was already in a state of contraction by June, the fact that July’s printing has fallen from 46 to 45.9 has done little to reassure investors. The only real consolation in this case is that forecasts had been for a worse outcome of between 45.2-44 points.
Responding to the news, Markit Chief Economist Chris Williamson said;
‘The surveys signal the steepest fall in business activity since April 2009; the turnaround in the index (a 4.6 point drop) being the largest ever deterioration recorded since the surveys began in 1997’.
Among the Pound’s surprising gains today have been advances of 0.3% against the US Dollar (GBP USD), 0.4% against the United Arab Emirates Dirham (GBP AED) and 0.8% against the South African Rand (GBP ZAR). In terms of losses, the Pound has fallen by -0.2% against the Australian Dollar (GBP AUD) and -0.3% against the New Zealand Dollar (GBP NZD).
Australian Dollar Weathers Expected RBA Interest Rate Cut
The Australian Dollar has appreciated lately, though this comes after a pair of economic events that should have crippled the appeal of the ‘Aussie’ overall.
Opening off movement earlier on was the June balance of trade result, which saw a considerable expansion of the current deficit from -2.42bn to -3.19bn.
A few hours later, the RBA announced that it had cut the national interest rate from 1.75% to 1.5%, although in a mitigating factor, this outcome had been largely priced in by markets.
In comments given after the decision was announced, RBA Governor Glenn Stevens said;
‘Growth in lending for housing purposes has slowed a little this year. All this suggests that the likelihood of lower interest rates exacerbating risks in the housing market has diminished’.
Future GBP, AUD Forecast: Pair of Services Stats due from Australia and UK Tomorrow
The near-term will bring two service sector measures, from both Australia and the UK.
Opening off tomorrow’s data will be the Australian AIG services index for July, which has a drop from 51.3 to 50 on the cards.
For the UK, a slide is predicted for the finalised July services PMI from 52.3 to 47.4; should this prove accurate, the Pound can be expected to nosedive, given how important the services sector is to the national economy.
Current GBP, AUD Exchange Rates
The Pound Australian Dollar (GBP AUD) exchange rate was trending in the region of 1.7510 and the Australian Dollar Pound (AUD GBP) exchange rate was trending in the region of 0.5715 today.
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