The Pound to Australian Dollar (GBP/AUD) exchange rate trimmed its previous decline to less than 0.1% overnight as geopolitical tensions sapped investor appetite for risk.
The Pound to Australian Dollar exchange rate slumped earlier in the week as China’s manufacturing PMI exceeded expectations and bolstered Australia’s trade prospects.
Sterling also came under considerable pressure as the odds of the Bank of England introducing a rate increase this year were reversed.
Although BoE Governor Mark Carney shocked investors earlier this month by intimating that an interest rate increase could take place earlier than markets currently expect, he appears to have taken on a more dovish attitude as a result of the latest UK employment figures.
While the unemployment rate continues to decline, the pace of wage growth in the UK has slowed significantly, increasing the level of slack in the economy and adding to the case for the BoE leaving interest rates on hold.
Further Pound pressure came as industry experts bet that the currency’s rally had been excessive.
However, the Pound to Australian Dollar (GBP/AUD) exchange rate was able to advance from a low of 1.8094 to push back above 1.8115 as geopolitical tensions lessened demand for the ‘Aussie’.
The situation in Iraq remains tense, causing extreme fluctuations in key commodity prices, and the tenuous stalemate achieved in Ukraine was put at risk after a government helicopter was shot down by Russian rebels.
Australian data also showed that the level of skilled vacancies in the nation dropped by 1.3% in May, month-on-month, after falling by a negatively revised 0.2 % in April.
China’s Westpac-MNI Consumer Sentiment report was something of a disappointment, edging from 121.2 in May to 112.6 in June.
In spite of this, some industry experts still believe that the Australian Dollar could break above the 95 US cents mark.
While the Australian Dollar to US Dollar (AUD/USD) is currently holding steady around the 0.9360 level, domestic fundamentals, the improving situation in China and the continuation of low interest rates in the US could all keep the ‘Aussie’ supported.
According to industry expert David de Ferranti; ‘A shift to a more hawkish stance from the RBA would raise speculation over a rise in the cash rate, and strengthen the currency’s yield appeal. This would likely require a more sustained improvement in the local labour market ad a lift in leading indicators like consumer and business confidence.’
While today’s Confederation of British Industry Reported Sales data could influence the direction taken by the GBP to AUD pairing as trading continues, fluctuations in the ‘Aussie’ are more likely to be occasioned by global economic developments and the big news from the US, including the nation’s final Q1 GDP and Durable Goods Orders figures.
Updated 09:10 GMT 26 June, 2014
Quiet Local Session Leaves Pound to Australian Dollar (GBP/AUD) Unaltered
The Pound to Australian Dollar (GBP/AUD) exchange rate continued trading in the region of 1.8065 as the European session opened. The pairing experienced little movement overnight due to a lack of influential economic data from the South Pacific.
Australia’s Job Vacancies report did show a 2.5% increase in May, down from a positively revised gain of 2.8% in April, but the figure had no impact on the ‘Aussie’.
Later today Bank of England Governor Mark Carney will deliver the UK’s Financial Stability Report. Should the central bank chief use this opportunity to provide greater clarity on the time line for raising interest rates, notable volatility in the Pound to Australian Dollar (GBP/AUD) exchange rate could occur.
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, 0.9366,
Australian Dollar,,Euro, 0.6882,
Australian Dollar,,Pound, 0.5520,
Australian Dollar,,New Zealand Dollar, 1.0780,
US Dollar,,Australian Dollar, 1.0671,
Euro,,Australian Dollar, 1.4520,
Pound Sterling,,Australian Dollar, 1.8116,
New Zealand Dollar,,Australian Dollar, 0.9264,
[/table]
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