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Pound to Australian Dollar (GBP/AUD) Exchange Rate Stronger before UK Data

Pound to Australian Dollar exchange rate graph

The GBP to AUD exchange rate has been trading in a fairly narrow range for the last week, although it could be argued that the ‘Aussie’ has been the more dominant force in the pairing.

When speaking of the GBP to AUD exchange rate’s performance over the past week Adam Solomon, Head Trader with a leading Forex provider, stated ‘The Pound to Australian Dollar had been inching higher before the UK Bank Holiday, peaking at a high just above 1.83, as the UK currency made broad gains across a basket of currencies. This week, the Pound slipped to 1.81 and endured a sharp decline on Wednesday, falling to key support above 1.79 following the release of a bullish report on the business outlook in Australia.’

At the close of the week the Pound was able to recover some of its recent losses as a result of unexpectedly upbeat UK consumer confidence figures and a Hometrack report showing a 0.5 per cent increase in domestic house prices.

Sterling also strengthened against peers like the Australian Dollar as a result of the British Chambers of Commerce positively revising its UK growth projections.

The BCC previously forecast that the UK economy would expand by 2.8 per cent in 2014 but now believes that the nation will enjoy growth of 3.1 per cent this year. If that proves to be the case it will be the UK’s strongest annual expansion since before the onset of the global economic crisis in 2007.

However, even with the UK’s economic performance going from strength to strength, the BCC still believes that there is a case for keeping interest rates on hold for the time being.
BCC economist David Kern noted; ‘As official interest rates start rising, probably in early 2015, indebted households with mortgages will come under increased financial pressure, and the weakening in household consumption will be a key factor in lowering GDP growth.’

On Friday the Pound strengthened by 0.3 per cent against the Australian Dollar.

With Bank of England and Reserve Bank of Australia rate decisions due out next week, considerable GBP/AUD volatility can be expected.

Both central banks are expected to leave interest rates on hold, so what direction will the GBP/AUD pairing take in the week ahead?

As forecast by Solomon; ‘The economic conditions in Australia have improved from the start of the year and there is obviously less pressure for the RBA to cut interest rates again but the Aussie Dollar will be susceptible to swings in risk sentiment due its connection with emerging markets. In addition, weaker demand from China has seen the price of Iron ore recently drop to a 2014 low and Australia’s reliance on the mining industry means it’s unlikely to Aussie Dollar will continue making gains against a resurgent Pound.’

GBP to AUD Updated – 02/06/2014

While China issued a surprisingly upbeat manufacturing PMI report on Sunday, disappointing domestic developments left the Australian Dollar a little softer against the Pound.

Over the weekend China’s manufacturing PMI was shown to have increased from 50.4 to 50.8, better than the reading of 50.7 expected and the strongest result for five months.

While this was a pleasant surprise, the ‘Aussie’ failed to see much benefit from the report.

The Australian Dollar came under pressure overnight after local building approvals were shown to have fallen by 5.6 per cent in April, month-on-month, rather than rising the 2.0 per cent expected.

March’s figure was negatively revised to -4.8 per cent.

On the year building approvals were up just 1.1 per cent, considerably short of the annual increase of 12.3 per cent expected.

Meanwhile Australian inventories fell by 1.7 per cent in the first quarter. A slump of 0.4 per cent had been expected.

The nation’s commodity index came in at 97.4 in May, down from a negatively revised 98.4 in May.

While the ‘Aussie’ was struggling, the Pound was holding onto the gains posted on Friday as a result of upbeat UK consumer confidence and house price figures.
Later today the UK’s manufacturing PMI and mortgage approvals data could inspire GBP to AUD movement.

If the manufacturing gauge declines modestly, as expected, the Pound could falter.

Economists will also be looking ahead to tomorrow’s Australian retail sales report and the Reserve Bank of Australia’s rate decision.

Retail sales are expected to have risen by 0.3 per cent in April, month-on-month.

Australian Dollar (AUD) Exchange Rates

Currency Currency Rate
Australian Dollar US Dollar 0.9254
Australian Dollar Euro 0.6798
Australian Dollar Pound 0.5523
Australian Dollar New Zealand Dollar 1.0919
US Dollar Australian Dollar 1.0806
Euro Australian Dollar 1.4710
Pound Sterling Australian Dollar 1.8107
New Zealand Dollar Australian Dollar 0.9128
As of 09:15 GMT