Australian Dollar (AUD) Softer Today after Weak Private Capital Expenditure Figure
Last night’s Australian Private Capital Expenditure for the third quarter proved disappointing, contracting to -9.2% as private investment within the domestic economy continued to decline. Reflecting less optimistically on the robustness of the Australian economy, this prompted the ‘Aussie’ (AUD) to downtrend and the GBP/AUD exchange rate to make fresh gains this morning in the region of 2.0879.
Earlier…
As the Pound (GBP) trends higher today, ahead of the Autumn Statement from Chancellor George Osborne, the GBP/AUD exchange rate has climbed away from a four-month low.
Hawkish RBA Comments Pushed GBP/AUD Exchange Rate to Four-Month Low
Comments from central bank policymakers were the primary driving force for both the Pound (GBP) and the Australian Dollar (AUD) on Tuesday, in lieu of other major domestic economic data. The ‘Aussie’ was shored up as Reserve Bank of Australia (RBA) Governor Glenn Stevens proved generally more hawkish, putting the brakes on suggestions that December might see an interest rate cut from the RBA. Stevens’ indication that he does not believe any move on interest rates is currently necessary prompted the antipodean currency to climb strongly across the board, in spite of base metal values persisting in the region of multi-year lows.
Bank of England (BoE) Governor Mark Carney, meanwhile, offered little clarity on when markets might expect a UK interest rate rise. The chances of a near-term change in monetary policy were dampened further by the BoE’s chief economist Andy Haldane taking a particularly dovish tone, repeating a previous suggestion that interest rates could as easily be cut as raised by the central bank. Discouraged by this less optimistic outlook, traders were inclined to move away from Sterling, pushing the GBP/AUD exchange rate to a fresh four-month low of 2.0741.
‘Aussie’ (AUD) on Downtrend after Australian Construction Contraction, Pound (GBP) Volatile ahead of Autumn Statement
Although the UK’s BBA Loans for House Purchase figure for October bettered estimates, rising from 44,825 to 45,437 to indicate continued strength within the domestic housing market, sentiment towards the Pound has remained generally muted today. Concerns of a bubble forming within the housing sector have not been assuaged by this latest data, with investors also displaying caution ahead of Chancellor George Osborne’s Autumn Statement. Expectations are for further austerity measures designed to erase the national deficit by 2020, a target that investors are eyeing with some trepidation.
The report of third quarter Australian Construction Work Done clocked in rather lower than expected this morning, showing contraction of -3.6% rather than the forecast -2.0%. Throwing some doubt on the strength of the domestic economy’s continued recovery, this prompted the ‘Aussie’ to retreat from its recent highs and enter a downtrend against many of the majors. However, the softness of the Pound has prevented the GBP/AUD exchange rate from particularly advancing today.
GBP/AUD Exchange Rate Forecast: Australian Dollar Weakness Expected on Strong US Data Today
Further weakening could be in store for the antipodean currency this afternoon, as the US Durable Goods Orders and Personal Consumption Expenditure Core are expected to provoke a fresh round of US Dollar (USD) strength. As bets continue to rise on the likelihood of the Federal Open Market Committee (FOMC) voting to raise interest rates before the end of the year a strong showing here is likely to weigh on the ‘Aussie.’
Friday’s third quarter UK GDP is likely to provoke further volatility for the GBP/AUD exchange rate, particularly if economic growth is found to have slowed. As the BoE is unlikely to be prompted into a nearer-term move on monetary policy, barring a particularly bullish display of strength in the domestic economy, this could see the Pound trending lower ahead of the weekend.
Current GBP, AUD Exchange Rates
At time of writing, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was trending narrowly in the region of 2.0791, while the Australian Dollar to Pound Sterling (AUD/GBP) pairing was slumped in the range of 0.4807.
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