While the Australian Dollar was slightly softer against the US Dollar today, its bullish relationship with a flagging Pound continued.
Overnight Sterling held declines against peers like the Australian Dollar, Euro and ‘Greenback’ as investors ditched the British asset in response to yesterday’s disappointing news.
Although the UK unemployment rate fell to its lowest level in five-years in the three months to March, the surge in self employment and the stagnation in wage growth remain of concern to policy makers.
The slack in the labour market led to a rather dovish inflation report from the Bank of England.
The Monetary Policy Committee left growth and inflation forecasts unchanged and stressed that they are in no rush to begin a cycle of hiking borrowing costs.
Sterling posted widespread declines after the report was released, hitting multi-week lows against several of its rivals.
As a new day of trading kicked off the Pound continued to trade around 0.22 per cent lower against the ‘Aussie’.
A lack of influential economic news for Australia restrained ‘Aussie’ movement overnight.
The domestic new motor vehicle sales report showed stagnation in April, month-on-month, with sales down 1.9 per cent on the year.
The AUD to USD pairing edged lower even as the US Dollar came under pressure ahead of Federal Reserve Chairwoman Janet Yellen speaking to the US Chamber of Commerce in Washington.
It is believed that Yellen will reassert the Fed’s commitment to keeping interest rates at record lows while engaging in the steady tapering of stimulus.
In the opinion of currency strategist Todd Elmer; ‘The Dollar is headed lower, and I think the currencies that are going to do best against the Dollar are those currencies that offer some carry. The stance from the Fed has been very relaxed.’
The ‘Greenback’ received some support from the expectation that today’s US industrial/manufacturing production reports, CPI and initial jobless claims data will add to the brightening picture of the US economy.
While today’s influential economic reports for the Eurozone and US could have an impact on the performance of the commodity-driven Australian Dollar, fluctuations might be a little limited ahead of the release of China’s business indicator for May.
With UK news lacking tomorrow, the Pound could hold declines against the ‘Aussie’ into the weekend.
Pound to Australian Dollar updated 16/05/2014
The Pound was able to close out the week in a slightly stronger position against the Australian Dollar.
Sterling has been feeling the heat over the last few days as investors digested the Bank of England’s surprisingly dovish inflation report and considered the remaining slack in the UK’s employment sector.
The British asset posted widespread declines on Wednesday and put on a patchy performance on Thursday.
However, less-than-impressive economic reports from the Eurozone and US saw investors lose their appetite for higher risk currencies and the Pound consequently pared declines against rivals like the Australian Dollar.
While the German economy was shown to have expanded by more than anticipated in the first quarter of the year, the economies of nations like France, Portugal, Italy and the Netherlands failed to perform so well. As a result, the Eurozone as a region posted meagre growth of 0.2 per cent in the first three months of 2014. Growth of 0.4 per cent had been projected.
Meanwhile, separate reports showed that industrial and manufacturing production in the US unexpectedly contracted in April.
As the results had a negative impact on the global economic outlook, they saw investors turn to lower-risk currencies.
The Pound was therefore able to strengthen against the Australian Dollar.
The GBP to AUD pairing climbed by 10 per cent.
Currency strategist Gregg Gibbs aid this of the Australian Dollar’s performance over the past five days; ‘In Australia, obviously the budget was a little bit tough, the data out of China was weaker, both of those things could have seen the ‘Aussie’ perform more negatively than it has, so you could argue that it has held up quite well. Those concerns have seen the ‘Aussie’ come back in the later part of the week’.
A lack of UK news is likely to limit additional Pound to Australian Dollar movement before the weekend.
UK reports to be aware of next week include consumer price inflation, retail sales, the publication of minutes from the Bank of England’s latest policy meeting and GDP figures.
Australian data to focus on includes Australia’s conference board leading index and the Westpac consumer confidence report.
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, 0.9345,
Australian Dollar,,Euro, 0.6811,
Australian Dollar,,Pound, 0.5565,
Australian Dollar,,New Zealand Dollar, 1.0822,
US Dollar,,Australian Dollar, 1.0700,
Euro,,Australian Dollar, 1.4676,
Pound Sterling,,Australian Dollar, 1.7985,
New Zealand Dollar,,Australian Dollar, 0.9244,
[/table]
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