While the Pound spent much of last week riding high, the British currency edged lower against the Australian Dollar on Tuesday.
Market movement was stilted on Monday due to the UK public holiday, but profit taking saw Sterling slide slightly against several of its major counterparts.
The Pound to Australian Dollar pairing (GBP/AUD) remained softer even after a gauge of Australian sentiment extended an already fairly steep decline.
The ANZ confidence index hit its lowest level since 2009 in the aftermath of the Australian budget having drooped by 15 per cent over the last five weeks.
A separate survey showed that financial stress among Australian consumers is at a four-year high.
According to economic adviser Stephen Koukoulas; ‘It is looming as a genuine threat to the recent strength in spending if consumers respond to financial difficulty by paring back expenditure. Causes of the rise in consumer financial stress are hard to pinpoint, but appear linked to the still weak growth in household incomes, accelerating credit growth and a still fragile jobs market.’
This report had little impact on the Australian Dollar and the commodity driven currency advanced by 0.4 per cent against the ‘Greenback’ overnight and remained in a stronger position against the Pound.
Later this week Australian reports are expected to show a further decline in construction work.
Meanwhile, the GBP to NZD pairing experienced fluctuations over the weekend following the publication of New Zealand’s trade balance data.
The report showed that New Zealand’s trade surplus narrowed in April as exports dropped by more than imports.
The result was largely due to a fall in shipments of meat and dairy products.
While imports eased by 4 per cent exports were down by a whopping 11 per cent.
In the view of Westpac economist Michael Gordon; ‘Exports have begun their normal seasonal decline. The fall this month was driven by quantities rather than prices, with dairy products down 5 per cent this month and meat down 8 per cent by volume.’
The ‘Kiwi’ recovered losses against the US Dollar as the week continued but remained lower against the Pound.
This morning the Pound received some support from the news that confidence among UK service companies’ advanced to record levels this quarter.
The Confederation of British Industry report showed that an optimism index advanced from 43 to 53 while a measure of confidence among professional services firms rallied to 54.
Comparatively hawkish comments from the Bank of England’s deputy Governor regarding increasing interest rates this year also gave the Pound a boost.
As the week continues movement in the GBP to AUD pairing may occur as a result of leading indexes from China/Australia, Australia’s construction work report, UK CBI reported sales figures, Australia’s new home sales data, the UK GfK consumer confidence survey and Australian private sector credit data.
Investors with an interest in the GBP to NZD exchange rate will also want to focus on New Zealand’s activity outlook/business confidence measures and New Zealand’s building permits report.
Pound to Australian Dollar Updated: 28/05/2015
Before the release of UK CBI reported sales data the Pound was trading lower against the Australian Dollar.
Sterling shed gains against its South Pacific counterpart yesterday as a slump in UK mortgage approvals reduced the odds of a Bank of England interest rate increase occurring before the spring of next year.
The GBP to AUD pairing held on to these declines overnight as investors processed several Australian economic reports.
Although Australia’s Westpac leading index slumped by 0.5 per cent in April, month-on-month, after stagnating in March, any ‘Aussie’ losses were limited as separate data showed that domestic construction work done unexpectedly increased by 0.3 per cent in the first quarter.
A quarterly decline of 0.5 per cent had been expected.
However, while this result was more positive than forecast, the fourth quarter’s construction work done figure was negatively revised to -1.1 per cent.
On the year, the volume of construction work done was up 2.6 per cent.
The surge in residential work made up for the decline in engineering work.
The Australian Dollar was also holding steady against several of its major counterparts ahead of the publication of domestic business investment data.
Tomorrow’s report is forecast to show a sharp drop in mining investment.
According to ANZ economist Dylan Eades; ‘Our bottom-up analysis of major projects suggests that investment in this sector will fall particularly sharply from mid 2014 as construction on the first few LNG projects winds down and a number of iron ore projects are completed. We are forecasting mining investment to decline around 20 per cent in year-average terms in 2014-15.’
If this projection proves accurate the Australian Dollar could falter tomorrow and the Pound may recoup losses.
The GBP to AUD pairing could also experience movement today as a result of the Confederation of British Industry’s reported sales data.
A reading of 35 is expected, but a particularly upbeat result could boost the Pound.
Australian Dollar (AUD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Australian Dollar,
,US Dollar, 0.9248,
Australian Dollar,,Euro, 0.6788,
Australian Dollar,,Pound, 0.5512,
Australian Dollar,,New Zealand Dollar, 1.0865,
US Dollar,,Australian Dollar, 1.0827,
Euro,,Australian Dollar, 1.4732,
Pound Sterling,,Australian Dollar, 1.8148,
New Zealand Dollar,,Australian Dollar, 0.9194,
[/table]
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