Although the downwardly revised Bank of England (BoE) 12-month Inflation Forecast initially weighed on the Pound (GBP), both the GBP/AUD and GBP/NZD conversion rates are posting gains today.
Australian Employment Data Shored up ‘Aussie’ (AUD) in spite of Pound (GBP) Strengthening on Optimistic BoE Meeting Minutes
It has been a rather mixed week for the ‘Aussie’ (AUD) after a strong showing on the Australian Construction PMI was followed up with a round of shortfalls. Initially the antipodean currency had been buoyed by the revelation that the construction sector had returned to a state of expansion in August, the first time the index has risen above the neutral baseline of 50 points in ten months. However, the resumption of falls on the Chinese stock markets and Wednesday’s Westpac Consumer Confidence clocking in at 93.9 soon weighed heavily on the ‘Aussie’ to prompt the GBP/AUD exchange rate into gaining ground.
Although the GBP/AUD pairing climbed to a fresh five-year high of 2.2091 in the early hours of Thursday the revelation of an, albeit expected, drop on the Australian Unemployment Rate helped spark a strong rally for the South Pacific currency. Simultaneously domestic Employment Change fell by a lower margin than had been forecast, with employment increasing by 17.4 thousand rather than just 5 thousand. Together this kept the ‘Aussie’ relatively dominant, in spite of the Pound (GBP) significantly strengthening as a result of encouraging Bank of England (BoE) meeting minutes.
A lack of further domestic data ahead of the weekend has seen some of the Australian Dollar’s recent gains eroded, particularly with the release of the US University of Michigan Confidence Survey on Friday afternoon set to impact the markets with another round of Fed hike speculation. However, Sterling has been unable to especially capitalise on this bearishness, as the BoE 12-month Inflation Forecast was today revealed to have been revised down from 2.2% to 2% and reducing the currency’s appeal. At present the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is moving in the range of 2.1837.
‘Kiwi’ (NZD) Softened on Reserve Bank of New Zealand (RBNZ) Interest Rate Cut to Boost GBP/NZD Pairing to Five-Year Best
Global market concerns kept the ‘Kiwi’ (NZD) on dovish form this week, in spite of the initial optimism that followed the announcement of a new ‘circuit breaker’ mechanism to be implemented on the Shanghai index. This rule will automatically suspend trading once shares hit a certain level of either positive or negative movement, with the intent of preventing the occurrence of another Black Monday. As Chinese Imports in August were shown to have contracted much more severely than had been estimated, however, the New Zealand Dollar was sent on a fresh downtrend against rivals.
Unable to take advantage of Sterling’s mid-week softening, due to a widened UK trade deficit and poor July production figures, the ‘Kiwi’ plunged overnight on Wednesday as a result of the latest Reserve Bank of New Zealand (RBNZ) Rate Decision. Proving as bearish as pundits had expected, the RBNZ opted to cut interest rates once again by 0.25% in an attempt to support the struggling domestic economy. While this is likely to shore up the local currency in the long-term, the immediate impact was decidedly negative, as traders moved away from the weakened ‘Kiwi’ in favour of its higher-yielding competitors. Due to this softening the GBP/NZD conversion rate was able to strike a five-year best of 2.4620 on the back of the more optimistic BoE meeting minutes.
While the pairing has since retreated somewhat, helped along by the production of a solid New Zealand Manufacturing PMI late on Thursday and a lowered BoE 12-month Inflation Forecast, the current Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is on an uptrend at 2.4523.
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