The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate spent much of the week trending in a lower range thanks to UK disappointments and improved Chinese growth prospects.
While Australia’s Consumer Price Index for the second quarter reduced the odds of the Reserve Bank of Australia (RBA) having to introduce an interest rate cut in the near future – bolstering the ‘Aussie’ in the process – the Bank of England (BoE) meeting minutes indicated that policymakers in the UK are also happy to leave interest rates on hold.
As the prospect of a split vote among BoE policymakers had elevated the Pound, the fact that the nine-member Monetary Policy Committee voted completely in favour of leaving interest rates at record lows dragged Sterling lower.
Over the next few days the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate consolidated losses in response to slightly disappointing UK retail sales figures and China’s encouraging manufacturing report.
While the Pound managed to recover some ground before the close of the week, the British asset still posted five-day declines against several of its peers.
On Friday the UK’s preliminary second quarter GDP figures were published. As forecast, the UK’s economy expanded by 0.8% in the second quarter, mirroring the growth recorded in the first three months of the year. On the year, the economy expanded by 3.1%.
This report confirms that the UK is performing above the peak recorded just prior to the onset of the global economic crises. However, in the opinion of Shadow Chancellor Ed Balls, stronger growth was not translating into a happier populace. He asserted; ‘with GDP per head not set to recover for three more years and [with] most people still seeing their living standards squeezed this is no time for complacent claims that the economy is fixed.’
GBP/AUD Five-Day Forecast
Next week is fairly data heavy, but the majority of the most market-moving reports will be coming from the US. That being said, we forecast that volatility in the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate could be caused by the UK’s Mortgage Approvals figures for June and the GfK Consumer Confidence gauge. If these reports print strongly the Pound could enjoy some gains.
However, Australian reports to take note of include the nation’s New Home Sales figures, Building Approvals data, AiG Performance of Manufacturing Index and Producer Price Index. Further positive results would make an RBA rate cut increasingly unlikely and could keep the ‘Aussie’ buoyant.
We also forecast that the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate could fall if China’s Manufacturing PMI impresses. The measure came in at 51 in June and if it moves further into expansion territory in July, commodity-driven currencies like the ‘Aussie’ may benefit.
UPDATED 16:25 GMT 28 July, 2014
Pound Sterling to Australian Dollar Slips Slightly
Over the course of a very quiet Monday the Pound Sterling to Australian Dollar exchange rate pared its earlier modest gain.
The Australian Dollar was able to advance on the US Dollar during the local session however as the possibility that this week’s US Q2 GDP report might not be as strong as some economists have forecast restrained the ‘Greenback.’
The Australian Dollar to US Dollar (AUD/USD) exchange rate pushed back above 94 US cents before the close of local trading.
UPDATED 14:35 29 July, 2014
Pound Sterling to Australian Dollar Sheds Short-Lived Gains
The Pound advanced against the Australian Dollar during the local session as industry experts bet that the strength of the ‘Aussie’ could force the Reserve Bank of Australia into slashing borrowing costs below 2.5% in the near future.
However, upbeat Australian housing data limited the ‘Aussie’s gains and the Pound went on to pare its advance during European trading.
While UK mortgage approvals were shown to have increased by more than expected in June, a high profile Bank of England policy maker intimated that the Pound is overvalued and that the pace of UK expansion could slow as a result of global economic developments.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate hit a high of 1.8083.
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