The Pound (GBP) weakened against the Australian (AUD) and New Zealand Dollars (NZD) on Monday as the market frets that the UK economic recovery is slowing and as comments made by the IMF and UK Business Secretary Vince Cable weighed.
Data released last week increased concerns that the UK’s strong economic recovery is starting to experience a slowdown. Weaker than forecast PMI reports suggest that momentum is beginning to slow as orders for UK goods from the Eurozone falter. As the single currency bloc weakens further the UK is feeling the negative effects.
Last week Bank of England Deputy Governor Ben Broadbent said that the UK recovery may not be strong enough for policy makers to warrant raising interest rates. His comments saw the Pound make its first loss against the Euro in three weeks and caused it to make its biggest weekly drop in 15 months.
Adding to the pressure upon the Pound were comments made by Business Secretary Vince Cable and the International Monetary Fund.
At the Liberal Democrat conference in Scotland, Mr Cable said; ‘Arguably the Pound is overvalued by 10 to 15% on a trade-weighted basis. This feeds back into monetary policy. It is a significant problem that we can’t directly address.’
Cable’s words mimic those made by the IMF earlier in the month who in its External Stability Report said the same thing. The comments sent the Pound lower against most of its major peers.
Earlier in the session the Australian currency found support from a weakened US Dollar and domestic data which showed that the number of jobs being advertised in the Land Down Under increased for a fourth consecutive month.
The data showed that job advertisements rose 0.9% last month, after an increase of 1.6% in August, whose figure was revised from a previously estimated 1.5% gain. As a result, the currency firmed against the Pound, US Dollar and Euro.
The New Zealand Dollar meanwhile made gains due to the softening of the US Dollar. Investors embarked on a bout of profit taking following last week’s stronger than forecast jobs data.
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast
The GBP/AUD currency pair will likely experience volatility on Tuesday as the Reserve Bank of Australia delivers its latest interest rate decision.
Policy makers are widely forecast to leave the nation’s interest rate unchanged at a record low of 2.5%.
“Once the RBA is out of the way attention will turn to the September employment report which seems especially uncertain,” Deutsche Bank economist Darren Gibbs said. The data is likely to show that 30,000 jobs were lost last month.
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,0.8723 ,
Australian Dollar,,Pound Sterling,0.5462 ,
Australian Dollar,,Euro,0.6954 ,
Australian Dollar,,New Zealand Dollar,1.1219 ,
US Dollar,, Australian Dollar ,1.1463 ,
Pound Sterling,, Australian Dollar ,1.8307 ,
Euro,, Australian Dollar ,1.4378 ,
New Zealand Dollar,, Australian Dollar ,0.8914 ,
[/table]
