Further Chinese Depreciation Pushes the Australian Dollar (AUD) Lower, GBP/AUD Exchange Rate Capitalises
The ‘one-off’ Yuan (CNY) devaluation was repeated for a third consecutive day overnight, shearing another 1.1% off the currency’s value. Naturally this has only increased the pressure on commodity currencies such as the ‘Aussie’ (AUD), prompting the GBP/AUD exchange rate to regain ground today to trend around 2.1278.
Earlier…
A good Consumer Confidence figure has little effect on the Australian Dollar (AUD) as the commodity currency continues to be squeezed by the devaluation of the Yuan (CNY).
GBP/AUD Exchange Rate Benefitted Strongly from Depreciation of Yuan (CNY) and Resultant Australian Dollar (AUD) Tumble
Disaster struck for the previously bullish ‘Aussie’ (AUD) in the early hours of Tuesday as the People’s Bank of China (PBoC) opted to begin depreciating the Yuan (CNY). The Australasian basket and commodity currencies were all badly hit by this move as Chinese buying power decreased and concerns for the global market rapidly rose. As the value of the Australian Dollar remains closely tied to the economic situation of China, the currency was severely dragged down against rivals in the wake of the announcement, causing the GBP/AUD exchange rate to jump to 2.1269.
Sterling (GBP), meanwhile, saw no major data releases in the beginning of the week, leaving it very much at the mercy of continued disappointment as a result of Thursday’s Bank of England (BoE) reports and the unlikelihood of an interest rate rise before the first quarter of next year.
UK Employment Data Holds Back the Pound (GBP) to Cause GBP/AUD Exchange Rate Slump as Chinese Devaluation Continues
This morning’s strong showing on the Westpac Consumer Confidence Index did not manage to help the ‘Aussie’ recover from its current round of losses. The index rose significantly past forecast, 94.56, to reach a decidedly more optimistic 99.5. However, any benefit the Australian Dollar might have derived from such a result was easily eclipsed by a second day of PBoC depreciation for the Yuan. In spite of repeated assurances from Chinese officials that they are not embarking on a currency war, traders remain concerned, forsaking the risk-sensitive ‘Aussie’ for safer havens. In consequence the GBP/AUD pairing trended further up to hit a peak of 2.1496.
Another rally was denied Sterling today, however, with the UK employment data ultimately proving to be not enough of a positive stimulus. While the Unemployment Rate remained stable at 5.6% as anticipated, the figure for Employment Change saw a larger decline than forecast of -63,000. This is not such a serious blow as it might initially seem as analysts remain undeterred in their predictions of a BoE rate hike coming in the first quarter of the next year. Nevertheless, the GBP/AUD exchange rate suffered a knockback to fall to 2.1173.
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast: Outlook of the ‘Aussie’ will Remain Tied to the Yuan
With continuing developments in China likely to be the primary influence on the ‘Aussie’ for the rest of the week, the only major domestic occurrence will be a speech tomorrow from Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent. Potentially indicating how the RBA may move on interest rates in future meetings, any hawkishness in Kent’s comments could give the Australian Dollar a boost. However, in light of Chinese events, it is generally expected that a more dovish turn of sentiment may be on the table.
Friday will see the UK’s year-on-year Construction Output figure for June. Predicted to experience a visible improvement in growth, 3.3% over the previous month’s 1.3%, this could give Sterling the added momentum needed to properly shake off the continued effects of ‘Super Thursday’.
Current GBP, AUD Exchange Rates
At time of writing the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has returned to a downtrend around 2.1229, with the Australian Dollar to Pound Sterling (AUD/GBP) pairing climbing in the range of 0.4707.
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