The Pound to Australian Dollar (GBP/AUD) exchange rate began the week trading in the region of 1.8306, falling by just 0.1% during the Australasian session.
Last week’s unexpectedly dovish commentary from the Reserve Bank of Australia drove the ‘Aussie’ lower against the majority of its most traded currency counterparts. The central bank asserted that the Australian Dollar was overvalued by more than a few cents and intimated that the excessive strength of the domestic currency was detrimental to export growth.
The RBA also hinted at the prospect of an interest rate cut being issued if the situation doesn’t change.
The Australian Dollar consequently recorded widespread declines and largely held these losses into the weekend.
In the opinion of some industry experts, the impact of the RBA’s intervention in the currency market will lessen over time and the Australian Dollar will rebound in the short term.
The advice of currency strategist Todd Elmer, therefore, is to take advantage of the weaker ‘Aussie’ while you can. He states; ‘By shifting to a neutral bias earlier this year and since emphasising that rates are to be on hold for an extended period, the RBA is suggesting that it is not inclined to cut in the near term. This means that it will do little to reduce the underlying attractiveness of owning an Australian asset. The conclusion is that the RBA is simply providing investors with better entry levels for the Australian Dollar longs and we suspect there will be less and less impact from successive rounds of verbal intervention.’
The Australian Dollar received some support overnight as the Australian AiG Performance of Construction Index was shown to have climbed from 46.7 to 51.8 in June. The impressive jump took the measure back above the 50 mark separating growth from contraction.
One AiG official said of the result; ‘The stars aligned for engineering construction with an unexpected lift in activity on the back of local government and infrastructure projects.’
Separate Australian data revealed that ANZ Bank’s gauge of job advertisements climbed by 4.3% in June, month-on-month, almost wiping out the previous month’s decline of 5.7%.
While today’s UK Lloyd’s Employment Confidence measure could have a modest impact on the GBP to AUD exchange rate, movement may be restrained ahead of tomorrow’s more influential data releases.
Australia is set to publish Business Conditions and Business Confidence figures while the UK will release Industrial Production and Manufacturing Production data, as well as the National Institute of Economic and Social Research’s GDP estimate for June.
If the industrial and manufacturing production figures show the respective increases of 0.3% and 0.4% expected, the Pound could be buoyed against its rivals and the Pound to Australian Dollar (GBP/AUD) exchange rate may climb.
UPDATED 12:35 GMT 07 July, 2014
Pound to Australian Dollar (GBP/AUD) Exchange Rate Could Falter after BoE
The Bank of England is due to deliver its interest rate decision later this week.
As the prospect of a BoE rate hike has been responsible for much of the Pound’s movement over the last few months, the event will be of interest to investors.
While the BoE isn’t expected to make any adjustments to either interest rates or the level of asset purchases, it is possible that some of the central bank’s policy makers will issue comments following Thursday’s announcement.
If the remarks are dovish in tone the Pound could drop. Conversely, hawkish comments or even hints that a rate increase could take place in November could drive Sterling higher.
The Pound to Australian Dollar (GBP/AUD) exchange rate is currently 0.15% lower than at the start of the European session. Additional movement in the pairing is likely to occur as the week continues.
UPDATED: 11:15 GMT 8 July, 2014
Pound to Australian Dollar Exchange Rate Extends Losses
The Pound to Australian Dollar (GBP/AUD) exchange rate began the European session in a weaker position as investors reacted to the promising improvement in Australian Business Confidence.
These declines were later extended as both UK Manufacturing and Industrial Production were shown to have declined in May on a month-on-month basis.
Respective monthly gains of 0.4% and 0.3% had been predicted.
As rate hike speculation has been driving movement in the Pound (GBP) exchange rate lately, this disappointing result came as something of a blow.
If the National Institute of Economic and Social Research’s UK GDP estimate for June also surprises investors, there could be additional volatility in the Pound to Australian Dollar (GBP/AUD) exchange rate.
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, 0.9357,
Australian Dollar,,Euro, 0.6889,
Australian Dollar,,Pound, 0.5458,
Australian Dollar,,New Zealand Dollar, 1.0726,
US Dollar,,Australian Dollar, 1.0687,
Euro,,Australian Dollar, 1.4518,
Pound Sterling,,Australian Dollar, 1.8322,
New Zealand Dollar,,Australian Dollar, 0.9323,
[/table]
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