After advancing on the Pound following the Reserve Bank of Australia’s interest rate decision and a positive domestic growth report, the Australian Dollar pared some of its gains overnight.
The GBP to AUD exchange rate climbed ever so slightly following the release of Australia’s trade balance report.
The data showed the Australia posted a deficit in April.
While Australia recorded a surplus of 902 million Dollars in March, this swung to a deficit of 122 million the following month.
A surplus of 510 million Dollars had been expected and the 1 per cent fall in exports was cited as the main reason for the surprising deficit.
The value of coal exports was shown to have fallen by 361 million Dollars.
According to analyst Michael Turner; ‘Spot coal prices had been softening through the last couple of quarters, and significantly so during March, and benchmark prices also reset around 15 per cent lower in April. Given that prices remain relatively low, it seems unreasonable to expect much of a bounce in coming months.’
The Australian Dollar was also slightly affected by China’s services PMI, which slipped from 51.4 in April to 50.4 in May. While the figure remains above the 50 mark separating growth from contraction, the slip was disappointing and reflected the fact that difficult market conditions continue to weigh on the services sector.
HSBC economist Hongbin Qu commented; ‘Latest data signalled a relatively big drop in the business expectations index, which fell to an 11-month low of 58.1, down from 60.7 in April. Both the new business and outstanding business indices were slightly weaker than April.’
It was also noted that the employment index held at a comparatively lower level.
China’s HSBC composite PMI rallied from 49.5 in April to 50.2 in May, bringing the measure back above the 50 mark separating growth from contraction.
Any ‘Aussie’ losses were limited as the news that the Australian economy expanded by 1.1 per cent in the first quarter of the year kept the asset buoyed.
The Pound, however, received a modest boost in the form of UK Halifax house price data.
The report showed that house prices rose by a seasonally adjusted 3.9 per cent in May, month-on-month – over five times the increase of 0.7 per cent expected.
As an overheating housing market could push the Bank of England into introducing an interest rate increase before next year the data was modestly Pound-positive.
Over the next few hours additional GBP/AUD movement could follow the Bank of England’s rate decision.
If the central bank acts as economists expect and leaves policy unaltered, any fluctuations in the GBP/AUD pairing will be minimal.
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, 0.9279,
Australian Dollar,,Euro, 0.6819,
Australian Dollar,,Pound, 0.5536,
Australian Dollar,,New Zealand Dollar, 1.0998,
US Dollar,,Australian Dollar, 1.0778,
Euro,,Australian Dollar, 1.4666,
Pound Sterling,,Australian Dollar, 1.8046,
New Zealand Dollar,,Australian Dollar, 0.9089,
[/table]
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