Westpac Leading Index Props up ‘Aussie’, GBP/AUD Cedes Some Gains
In spite of Asian stock markets continuing to reel with the renewed signs of slowdown in China the ‘Aussie’ (AUD) is holding its ground today. The Westpac Leading Index came in at 0%, the same as the previous month, to somewhat assuage fears of Australian economic contraction. As the boost from the UK Consumer Price Index result begins to fade a little today the GBP/AUD exchange rate is slightly down at 2.1327.
Earlier…
The GBP/AUD exchange rate has experienced a resurgence today with the UK Consumer Price Index revealing an increase in the level of inflation.
Interest Rate Speculation Led to Spike in GBP/AUD Value Yesterday
Comments from Monetary Policy Committee (MPC) member Kristin Forbes prompted an unexpected but brief rally for Sterling (GBP) yesterday. Forbes’ hawkish suggestion that it would be better for the UK economy to raise interest rates sooner rather than holding off too long sparked increased demand for the currency as investor optimism rose. A lack of real economic support for the speculation soon saw the GBP/AUD pairing cede back its gain, however, to fall to a weekly low of 2.2098.
As additional depreciations to the Yuan (CNY) failed to materialise over the previous days the ‘Aussie’ (AUD) naturally stabilised. Reduced fears of a currency war benefitted the antipodean currency, although the still fragile state of the global economy and currency markets left the chances of a more significant rally reliant on the release of a stronger domestic stimulus.
Pound Bullish on Improved UK CPI, GBP/AUD Exchange Rate Soars Today
Released in the early hours of the day, the Reserve Bank of Australia (RBA) meeting minutes for July conveyed a decidedly more optimistic sentiment than those of the previous month. Governor Glenn Stevens appeared confident that the ‘Aussie’ (AUD) was managing to adjust and not suffering unduly in the wake of commodity market volatility and many of the nation’s major exports trending near multi-year lows. Of course, the fact that these comments were made prior to the turmoil of last week’s record run of Yuan depreciations has somewhat muted the impact this report has had on the GBP/AUD exchange rate.
Capitalising on the softened state of the Australian Dollar this morning, the UK Consumer Price Index posted an unexpected rise to 0.1% rather than remaining static at 0%. This key indicator of domestic inflation is one on which the MPC places a fair degree of importance when making decisions on interest rates, leading to another, more substantiated, surge in demand for the Pound. With the currency rising across the board on bullish trading the GBP/AUD pairing has consequently climbed to 2.1389.
GBP/AUD Exchange Rate Forecast: Potential Yuan Devaluation to Hurt ‘Aussie’
After last night saw Chinese stock markets tumble in their biggest drop in three weeks the outlook for the ‘Aussie’ is not good, with the chances of renewed deprecation on the Yuan weighing heavy on the minds of traders. In spite of this week’s RBA minutes the potential for Australian interest rate cuts will almost certainly return to dog the currency in the coming days, particularly with a lack of domestic economic data to counteract concerns.
Thursday’s Retail Sales data for the UK may ultimately cut the Pound’s current bullish run short, however, should it prove to be out of line with expectations and the inflation boost. If the report provides further support to rate rise speculation though the GBP/AUD exchange rate is sure to continue trending upwards.
Current GBP, AUD Exchange Rates
At time of writing the Pound Sterling to Australian Dollar (GBP/AUD) pairing is moving strongly in the range of 2.1375, while the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate remains in a slump at 0.4675.
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