Foreign Currency Market Update – GBP / AUD Update
Last week’s session saw the GBP AUD exchange rate break to a 27-year low for the ninth week in succession, confirming the pair’s strong downtrend since the turn of the year. However, the low of 1.4555 was reached on Wednesday and by Friday’s close, Sterling had recovered its poise to trade back up to 1.4798 against the go-ahead Aussie. However, it’s far too early to call a bottoming out in this market – that would require a prolonged bout of trading back in the 1.5000s.
Strong Australian data releases once again provided a fair wind for the AUD last week; Tuesday night’s NAB Australian Business Confidence survey for January set the tone showing an improvement on December’s +3 figure, to print at +4. The Westpac Consumer Confidence survey for January followed shortly afterwards, showing a similar pick-up in Australian sentiment. Australian labour market numbers, released in the early hours of Thursday morning, were also positive, showing that 46,300 new jobs had been created last month. Meanwhile, in the UK, the juxtaposition was stark, with January’s Jobless Claims data showing that the British claimant count had risen by 6,900 – more than twice the expected level, last month. Tuesday’s CPI Inflation numbers showed that the rate of UK price rises had fallen to an annualised 3.6%, as per expectations. This makes the chances of a near-term Bank of England interest rate rise even more remote, placing further downside pressure on Sterling. However, the week ended on a slightly brighter note for the Pound, with the release of the latest UK Retail Sales numbers, which showed an unexpected increase of 1.9% in the level of British shop sales last month.
*Denotes the importance of the data item *** being the highest level.
** Tuesday morning sees the release of January’s UK Public Sector Borrowing figures – they are expected to show that the British government managed to pay off £6.3bn of its debt last month – a lower number than this could hurt Sterling.
*** Wednesday morning’s release by the Bank of England of the minutes of its February MPC meeting will be closely-monitored by analysts for clues on the future direction of British monetary policy.
*** Friday morning sees the release of the official Q4 GDP figures for the UK economy – a quarterly contraction of 0.2% is expected. Anything worse than this could spark a Sterling sell-off.
*** The minutes of the February Reserve Bank of Australia board minutes are released on Tuesday.
** Tuesday evening sees the release of the Australian Conference Board Leading Index.
** November’s average Weekly Wage data for Australia are released on Thursday – a slight dip from October’s numbers is anticipated.
The GBP AUD technical outlook continues to appear grim for clients requiring Australian Dollars any time soon. The downtrend for the pair continues, with the GBP AUD exchange rate once again testing lower over the past seven days. It will take a considerable jolt to knock this downward move off its current course. Yesterday’s announcement by the Iranian authorities that it is blocking oil exports to the UK and France following an intensifying of pressure on Tehran to cease its nuclear programme by Western governments, could alter things. Any escalation of this situation has the potential to drain appetite for risk from global markets, hurting the Australian Dollar. This apart, it looks like there is the potential for another week of losses for GBP AUD, with the latest €130bn of Greek bail-out funding likely to be approved by eurozone policy-makers later today. This will improve investor sentiment and Tuesday’s release of the RBA minutes which will serve to focus investors’ thoughts on the relatively high level of Australian interest rates, will probably have the same effect.
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