The Pound to Australian Dollar (GBP/AUD) exchange rate was trending lower on Friday after the UK trade deficit widened more than economists had forecast in September. Moreover, the ‘Aussie’ climbed as the appeal of the Trans Tasman currency increased after the Reserve Bank of Australia (RBA) issued a policy statement.
Pound Sterling (GBP) Exchange Rate Weakens as Deficit Widens
The Pound sank as the UK Visible Trade Deficit widened from -£8950 to -£9821. Many economists suggest that the Eurozone slowdown could be enough to hinder the UK economic recovery in coming months.
Economist Alan Clarke stated: ‘It is the lack of domestic demand in the Eurozone that means we struggle to increase our exports as much as our imports. This is probably because continental European consumers and businesses are demanding less of everything and there is not an awful lot that we can do about that apart from watch and wait for the Eurozone recovery to gain traction—or try to export more to elsewhere on the globe.’
RBA Statement Inspires Australian Dollar (AUD) Exchange Rate Gains
Ironically, as the RBA reiterated once again that the Australian Dollar was high by ‘historical standards’ the currency advanced higher still. The report stated: ‘The Australian Dollar remains high by historical standards and, in trade weighted terms, is above the level seen earlier in the year despite the sizable declines in commodity prices over the course of this year.’
Despite this attempt to jawbone the currency lower, the fact that the RBA stated that interest rates will remain on hold for at least another year gave the Australian Dollar a boost.
The price of iron ore has declined in recent months and affected the Australian Dollar quite dramatically.
The labour market in Australia has also been lethargic but the RBA tried to be upbeat about the future of the working sector. The RBA stated: ‘Labour market conditions remain subdued. Leading indicators of labour demand have picked up since the beginning of the year and point to modest employment growth over the coming months.’
Canadian Dollar (CAD) Exchange Rate Rebounds as Unemployment Falls
Meanwhile, both the Pound and Australian Dollar softened against the Canadian Dollar (GBP/CAD, AUD/CAD) on Friday in response to the news that the Canadian Unemployment Rate dipped far below initial predictions. Net Change in Employment in Canada revealed 43.1K jobs were created in October, a far more favourable figure than the -5.0K forecast. As a result the Canadian Unemployment Rate was able to sink to 6.5% from 6.8%; a direct contrast to the prediction of an increase to 6.9%.
The Canadian Unemployment Rate has sunk to the lowest level since 2008, which has seen investor sentiment in the ‘Loonie’ rise dramatically. Finance Minister Joe Oliver commented: ‘While monthly job numbers can be volatile, the significant increase in the last two months indicates a positive trend. Our plan for jobs and growth is working.’
This Week’s Pound to Australian Dollar (GBP/AUD) Exchange Rate Forecast
Monday will see the release of Australian Home Loans figures as well as Chinese data which may offer the Australian Dollar exchange rate some support. As China is Australia’s largest trading partner, positive developments in the newly appointed world’s largest economy can bolster the Trans Tasman currency.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trending in the region of 1.8369
Other Chinese reports to be aware of this week include the nation’s retail sales and industrial production stats.
AUD/USD Rebounds on US Jobs Data
As the Australasian market reopened on Monday the Australian Dollar to US Dollar (AUD/USD) exchange rate surged on the back of last week’s below-forecast US employment report.
Prior to the publication of Australia’s Home Loans data and China’s Consumer Price Index the Australian Dollar was trending higher against both the US Dollar and Pound (GBP/AUD).
One industry expert said this of the US data and the ‘Aussie’s subsequent uptrend; ‘When the Fed upgraded its assessment of the labour market, they set expectations for a very strong non-farm payrolls report and unfortunately Friday’s jobs number failed to impress, sending the Dollar lower against all of the major currencies. The unemployment rate dropped to 5.8 per cent from 5.9 per cent but the US economy added only 214,000 jobs compared to a forecast for 235,000.’
Australian Dollar Gains on Strong Chinese Exports
The Australian Dollar advanced against the Pound and other majors on Monday on the back of better-than-expected Chinese data. Chinese exports rose by 11.6% on the year in October showing sturdy growth for the world’s largest economy. However, there are still some doubts surrounding the legitimacy of Chinese statistics after it emerged China had over-reported the amount of exports to Hong Kong in an attempt to avoid currency control measures.
Barclays commented on the situation, saying: ‘The continued strong growth in exports to Hong Kong inflating growth rates. The most likely reason for over-reporting of exports is to circumvent China’s capital controls and bring money into the country. We estimate that the six months from November 2012 to April 2013, Chinese exports were overstated by $81 billion, equal to 8% of total real exports over the same time period.’
Pound Exchange Rate Pressured Lower by EU Referendum Debate as Australian Politics Boost ‘Aussie’
The Pound was offered little support as the debate regarding the EU referendum in 2017 continues. David Cameron attempted to rebuff fears that the economic recovery could be hindered from a breakaway for the UK from the Eurozone.
Meanwhile, Australian Prime Minister Tony Abbott supported the Australian commodity currency was at a ‘comfortable’ level and suggested that the recent drop in iron ore prices may not be permanent.
Bank of England Inflation Report could see Sterling Drop
As the European session continues the Pound has been able to recoup some losses against the Australian Dollar. However, Sterling could drop significantly when the Bank of England reveals its inflation report on Wednesday.
Economist Laura Rosner commented: ‘The Bank of England’s November Inflation Report is likely to show a sharp downward revision to its near-term inflation estimates, due to a lower-than-expected current rate and declines in oil prices.’
However, if this is the case the prospect of interest rate hikes in the early part of next year will be put in jeopardy and cause investor sentiment in the Pound to wane.
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,0.8668,
Australian Dollar,,Pound Sterling,0.5454,
Australian Dollar,,Euro,0.6947,
Australian Dollar,,New Zealand Dollar,1.1111,
US Dollar,, Australian Dollar ,1.1537,
Pound Sterling,, Australian Dollar ,1.8324,
Euro,, Australian Dollar ,1.4382,
New Zealand Dollar,, Australian Dollar ,0.8979,
[/table]
