‘Aussie’ (AUD) Down Further on Heightened US Confidence
The University of Michigan Consumer Confidence survey has shown a surprising uptick in optimism, with the index rising from 92.6 to 93.3. While assessment of the current economic conditions fell slightly, expectations for the future rose from 82.7 to 85.7. The unexpected pick-up in consumer sentiment has been enough to overshadow multiple pieces of underperforming data, which has weakened the ‘Aussie’ even further.
National Australia Bank Chief Economist: Low Oil Good for Australian GDP
Alan Oster, chief economist at the National Australia Bank, has claimed that lower oil prices would improve profitability across the Australian economy and increase consumption by 0.4% annually, contributing an additional 0.25% to GDP. He also cites NAB forecasts which predict both oil and iron ore will have risen to around US$40 per barrel by the end of 2016.
Earlier…
Worse-than-expected lending figures from China caused another investor panic during yesterday’s Australasian session, pushing the Australian Dollar (AUD) in to a nosedive. A weakened Pound Sterling (GBP) has been able to advance despite a fog of unsupportive data and market sentiment, with the GBP/AUD exchange rate trending up 1.3%.
Worsening 2016 Outlook Not Enough to Harm GBP/AUD Exchange Rate Today
The outlook for 2016 is not a rosy one for the Pound, with the Bank of England’s (BoE) inaction, uncertainty surrounding a ‘Brexit’ and the prospect of depreciation as the market corrects an overvalued Sterling all weighing heavily on the British asset.
Fears that Britain’s recovery is being driven by unsustainable consumer credit are unlikely to be soothed by today’s Credit Condition Survey from the Bank of England. The survey reveals that the number of unsecured loans was on the rise as lenders became less-risk averse and the credit scoring criteria for personal loans was relaxed. Buy-to-Let (BTL) mortgages were in high demand, despite warnings from the BoE over the vulnerability of the market.
UK consumers borrowed £1.5 billion in November 2015, £300 million more than the monthly average for the previous six months, while one-in-three consumers was expected to pay for Christmas using credit. Mortgage borrowing reached £3.9 billion in November, £800 million above the previous six-month average and the highest figure for a single month’s borrowing since May 2008, just before the credit crunch.
Despite numerous weakening factors, the Australian Dollar is hit by much more potent negative speculation, corroborated by data from China, so the GBP/AUD exchange rate has managed to trend up around 2.0877.
Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Nosedives on Increasingly Dovish Chinese Speculation
A combination of poor Chinese lending figures and another drop in oil prices has pushed the Australian Dollar into a tumble. New Yuan Loans only reached 597.8 billion in December, far lower than the 700 billion forecast after the 708.9 billion loaned the previous month. The poor figures, combined with a slower-than-anticipated growth in the M1 and M2 Money Supply, sparked new fears that People’s Bank of China’s (PBoC) monetary stimulus efforts weren’t working. As a result the Chinese CSI300 index fell -3.2%, while the Shanghai Composite dropped -3.5%, taking total share losses in 2016 to -16%.
The Australian ASX/S&P200 felt some of the panic, closing down -0.34%. Losses have been further compounded by another drop in oil, with both Brent and WTI Crude slipping below the key US$30 per barrel mark. The Australian Dollar has tumbled -0.6% against the Canadian Dollar (CAD), -1.1% against Pound Sterling, -1.6% against the Chinese Yuan (CNY), -1.7% against the US Dollar (USD) and -2.2% against the Euro (EUR).
The AUD/GBP exchange rate is currently trading between 0.4778 and 0.4850.
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast: US Data Could Increase Downward ‘Aussie’ Pressure
There is no data left for this week for either the UK or Australia, so forthcoming US data could become one of the key driving factors for GBP/AUD. Advance Retail Sales are expected to show a -0.1% drop, while the University of Michigan Confidence index is expected to remain level at 92.6. Positive results will push the ‘Aussie’ lower, while negative ones could give the AUD a much-needed reprieve.
The GBP/AUD exchange rate is currently trading between 2.0610 and 2.0908.
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