The Pound Sterling to Australian Dollar (GBP/AUD) and Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rates advanced strongly on Thursday due to the release of disappointing economic data out of the Trans Tasman economies.
Australian Central Bank Forecast to Cut Interest Rates Again in March
Unemployment in Australia was shown to have climbed to its highest level in 13 years in January, increasing speculation that the nation’s central bank will choose to cut interest rates again next month.
According to the Australian Bureau of Statistics, the number of people out of work increased by 12,200 in the first month of the year, a figure that was a lot higher than the 5,000 number forecast by economists. The nation’s overall unemployment rate jumped from 6.1% to 6.4%. The poor figure caused analysts to predict that the jobless rate could rise to 6.5% over the coming months.
‘The odds that the RBA cuts interest rates again have significantly increased following the poor Australian employment report. Meanwhile, the US central bank is still on track to raise the interest rate in June,’ said Commonwealth Bank of Australia senior currency strategist Elias Haddad.
Falling iron ore prices and risk aversion because of the so far failed Ukrainian peace talks and Greek negotiations are also weighing on the currency.
New Zealand Data Weighs on ‘Kiwi’
The New Zealand Dollar exchange rate also fell on Thursday as the currency was weighed upon by domestic data, which showed that manufacturing activity in the country fell to its lowest level in two years in January.
The BNZ-Business NZ performance of manufacturing index fell to a seasonally adjusted figure of 50.9 in January, a sharp decline from December’s revised figure of 57.1. It was also the lowest figure recorded since December 2012.
‘The PMI suggests manufacturing production fell in January. Disconcertingly, new orders were flat and inventory jumped. This is not a good mix. It all smells of an involuntary inventory build caused by insufficient demand. If so, it does not bode well for production ahead, short of a bounce back in demand,’ said BNZ senior economist Doug Steel.
GBP/AUD & GBP/NZD Exchange Rate Forecast
The Pound Sterling could give up some of its earlier gains against the Australian Dollar and New Zealand Dollar as market attention turns to the upcoming Bank of England (BoE) Inflation report.
Some economists are expecting the report to show that the UK will enter a deflationary period over the coming months. Concerns over Greece and Ukraine are also expected to influence the currency market.
