Foreign Currency Market Update – GBP / AUD Update
Last Thursday’s session saw the Pound Australian Dollar exchange rate break to a fresh 49-month high of 1.8342, confirming the sustained uptrend which the pair has been locked in since Easter time.
The Australian tender suffered a session of pronounced losses on Thursday following the publication of tame Australian labour market figures and a strong set of American shop sales data. Although the Australian jobs numbers revealed that a higher than anticipated 21,000 new positions had been generated in the Aussie economy last month, the AUD-negative effect of a rise in the overall rate of unemployment from 5.7% to 5.8% more than cancelled this out.
Retail Sales figures from the States, showing a higher than expected level of spending by US citizens last month, provoked further selling pressure on the Australian unit. The encouraging US data sparked market speculation that this week’s US Federal Reserve FOMC policy meeting may bring news of a cut in America’s controversial $85bn per month Quantitative Easing programme – a move which would harm the risk-sensitive Australian Dollar.
The poor performance form the Australian Dollar during the latter part of last week was also attributable to comments from Reserve Bank of Australia Governor Glenn Stevens in an interview with the Australian Financial Review. Stevens reiterated his desire for a weaker domestic currency, stating that this represented the Australian economy’s best path back to prosperity. The fact that he stated his preference for a reduction in the value of the Aussie over any further interest rate cuts fuelled speculation that the RBA may be about to actively intervene in the market in order to weaken the AUD.
Looking ahead, Wednesday’s session could be a pivotal one; news of a sizeable cut to Quantitative Easing form the US Federal Reserve is likely to send GBP AUD back up towards last Thursday’s range-topping rate of 1.8342. Conversely, if the Fed refrains from tightening its monetary policy then a downside correction would be a likely next move for GBP AUD. In such a circumstance, the next significant level to look for heading lower for the pair comes at October’s low of 1.6645.
Summary of major upcoming data releases that we think may move the market.
|Date||Time||Issuing country/region||Data Item||Market Expectation||Market Sensitivity|
|17th December||00:30||Reserve Bank of Australia||Minutes of December Policy Meeting|
|17th December||09:30||UK||Consumer Price Index (Annualised) (November)||2.2%|
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