Pound Weaker as Trade Begins
The GBP to AUD exchange rate was 0.18 per cent softer as trading began on Friday.
Yesterday the Pound was supported by a Halifax report detailing a surge in UK house prices and held steady after the Bank of England acted in accordance with economists’ forecasts and left fiscal policy unaltered.
The ‘Aussie’, on the other hand, spent Thursday in a slightly weaker position as investors digested the news that Australia posted a surprising trade deficit in April as a result of declining exports.
The bias in the Pound to Australian Dollar exchange rate switched as trading progressed however and the higher-risk Australian Dollar came out on top as investors developed an appetite for higher-risk assets in the aftermath of the European Central Bank’s rate decision.
ECB Action Lifts Australian Dollar
After months of posturing the central bank finally took action and introduced historic measures in order to support the Eurozone’s flagging economic growth.
The stream of measures, which included implementing a negative deposit rate, bolstered riskier assets like the ‘Aussie’ and ‘Kiwi’ while pushing the Euro lower.
According to currency strategist Sean Callow; ‘Support seems to be coming from the ECB measures. Investors are looking for a place to put their month in a world of very low yields.’
The AUD/GBP pairing advanced and the Australian Dollar jumped by 1 per cent against the Euro.
The AUD/USD exchange rate was also fetching over 93.20 US cents.
Domestic Data has Little Impact
During Australasian trading the Pound to Australian Dollar exchange rate was little affected by a domestic AiG Performance of Construction report.
The index rose from 45.9 in April to 46.7 in May but still held below the 50 mark separating growth from contraction.
The report showed strong house building growth but a decline in the number of new orders for engineering tanking.
In the opinion of an economist with Australia’s Housing Industry Association; ‘Further growth in residential construction activity in 2014 will be important for the Australian economy given the positive flow-through such expansion has to segments of Australia’s manufacturing, supplier, and retailing sectors’.
As the day progresses further GBP to AUD movement could be inspired by the UK’s trade balance figures.
Next weeks forecast…
Investors will also be focusing on the influential US non-farm payrolls report, due out today at 13:30.
A surprising result may result in widespread currency market movement.
Next week volatility in the Pound to Australian Dollar exchange rate could be inspired by Australia’s home loans and investment lending figures, consumer confidence index and employment reports.
UK news to watch out for includes the nation’s employment report and construction output data.
Australian Dollar (AUD) Exchange Rates
|Australian Dollar||US Dollar||0.9334|
|Australian Dollar||New Zealand Dollar||1.0980|
|US Dollar||Australian Dollar||1.0702|
|Pound Sterling||Australian Dollar||1.7989|
|New Zealand Dollar||Australian Dollar||0.9102|