Sterling may have strengthened against both the Euro and US Dollar on Monday, but the GBP to AUD exchange rate drifted lower ahead of the release of influential UK data.
Over the course of Australasian trading the ‘Aussie’ was supported against some of its most traded currency counterparts as investors processed a mixed bag of domestic reports.
While Australian investment lending was shown to have surged by 2.3 per cent in April, wiping out the positively revised 0.6 per cent decline recorded in March, home loans in the nation showed unexpected stagnation in the same period.
A home loans increase of 0.2 per cent had been anticipated. However, March’s decline was upwardly altered to -0.8 per cent.
Meanwhile, the NAB business confidence measure held at 7 in May and the index of business conditions eased slightly, drifting from 0 to -1.
The value of Australian loans climbed by 1.4 per cent in April, month-on-month, following a decline of -1.0 per cent the previous month.
Part of the reason for the ‘Aussie’s resilience was the impact of a stronger Chinese Yuan. In the opinion of currency strategist Sean Callow; ‘The Aussie Dollar has managed to negotiate the European Central Bank meeting and the US employment report and continued to gain. The Chinese currency has been rising today and when it rises, then there’s often a positive flow on effect to the region – money seems to come into Asia when the Yuan is rising. The Aussie is rising on the back of optimism in China and very healthy gains on the Chinese stock market.’
Yesterday Chinese data revealed a surprisingly strong surge in domestic exports. On Tuesday China’s consumer price index showed that Chinese inflation quickened to its most rapid pace for four months, with consumer prices climbing by 2.5 per cent in May from a year earlier.
The Australian Dollar rallied against the Pound and achieved a 6-month high against both the Euro and Swiss Franc overnight.
However, while the GBP to AUD pairing began European trading in a weaker position, the Pound may recover its losses in the hours ahead thanks to upbeat UK manufacturing and industrial production reports.
Both the manufacturing and industrial production reports showed stronger-than-anticipated annual growth, with latter sector displaying its largest annual increase since 2011.
The Pound to Australian Dollar exchange rate could recoup losses as the day progresses, but investors will also be taking into account Australia’s upcoming Westpac consumer confidence report. In May sentiment was shown to have declined markedly so investors will be hoping for a better result for June.
Pound to Australian Dollar update 11/05/14
Wednesday has seen the Pound hold previous declines in the GBP to AUD exchange rate regardless of the UK’s positive employment figures, which showed that employment climbed by 345k in the three months to April following an increase of 283k in the previous period. This favourable report smashes the predicted forecast of 270k.
This has meant a drop in unemployment figures from 6.8 per cent to slightly better 6.6 per cent – an over five year low.
However, the positive result in unemployment is diminished slightly in recognition of the UK’s weekly earning statistics, which showed that wages increased by just 0.7 per cent – down from an increase of 1.7 per cent in the three months to March.
Although recovery from the recession has been slow, the UK is set to undertake the largest economic expansion of the Group of Seven nations in 2014.
Industry expert David Tinsley commented: ‘This is a solid start to the second quarter. If manufacturing production went sideways in May and June it would still be up 1.1 per cent over the quarter. And all survey evidence suggests a better performance than that is possible.’
As Australia’s Dollar is still riding high following the release of positive trade figures and business confidence data, the Pound has softened further against it. The release of Australia’s employment figures on Thursday could strengthen the AUD to GBP relationship further.
Australian Dollar (AUD) Exchange Rates
|Australian Dollar||US Dollar||0.9360|
|Australian Dollar||New Zealand Dollar||1.0975|
|US Dollar||Australian Dollar||1.0659|
|Pound Sterling||Australian Dollar||1.7873|
|New Zealand Dollar||Australian Dollar||0.9118|