British businesses have breathed a sigh of relief on Friday after the voting for Scottish independence saw a victory for the Unionists. Trader sentiment towards the Pound has improved dramatically as evidenced by Sterling gains across the board. Both New Zealand and Australia have battled against falling commodity prices, and a drop in the value of wheat has intensified the fight.
The Pound Sterling to Australian Dollar exchange rate is currently trending in the region of 1.8380.
The Pound Sterling to New Zealand Dollar exchange rate is currently trending in the region of 2.0216.
In the past few weeks leading up to the Scottish referendum the Pound had lost a huge amount of ground due to trader anxieties and risk aversion. Sterling has also struggled against a continued miscorrelation between wages and inflation as evidenced on Wednesday and Thursday. Consumer Prices indicated that inflation has fallen; moving away from the Bank of England’s 2.0% target. Average weekly wages showed the coolest growth since comparable records were introduced in 2001.
Both Australia and New Zealand have been afflicted by global commodity price cuts. In particular, Australia has suffered from raw material price cuts and New Zealand from a reduction in dairy and crude oil value.
The Pound Sterling to Australian Dollar exchange rate has hit a low today of 1.8276.
The Pound Sterling to New Zealand Dollar exchange rate has hit a low today of 2.0140.
Friday morning has seen a complete reversal in fortune for those invested in Sterling after the Scottish referendum saw a Unionist victory by 55%. The Pound has now reclaimed the title of the best performing major currency of the past 12 months.
With an absence of British economic data on Friday the Pound is likely to continue to trend highly against many of its major peers now that trader anxieties have abated. ‘Given the resounding result for the ‘no’ vote, it should settle a lot of the uncertainty that markets have been experiencing with regard to sterling,’ Phyllis Papadavid, a senior global-currency strategist at BNP Paribas SA in London, said by phone. ‘Obstacles are cleared for sterling now really to go back to fundamentals’.
On Friday it transpires that wheat has fallen to a four-year low after demand for US exports declined significantly. This has a major detrimental effect on the commodity-correlated ‘Aussie’ (AUD) and ‘Kiwi’ (NZD) after yet another decline in demand for commodities.
There is, however, the potential for a slight boost to the economic standings of the South Pacific cousins if demand for grain remains high. The US shale-oil boom is clogging up rail lines to ports to such an extent that the US may not profit from their recent record grain harvest. Should this be the case; demand for Australian and New Zealand grain could be boosted exponentially.
The Pound Sterling to Australian Dollar exchange rate has reached a high today of 1.8477.
The Pound to New Zealand Dollar exchange rate has reached a high today of 2.0337.
