The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate retraced its steps in the second half of European trading after a mixed bag of UK labour market data offered little Sterling support.
Although wage growth increased from 1.0% to 1.4% on the year, the UK Unemployment Rate remained at 6.0% instead of falling to 5.9% like economists had forecast.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate continued its advance on Wednesday after the Westpac Leading Index contracted in November by -0.06%.
The index showed that economic growth was likely to remain below trend in the near future as the monthly job count worsened–a possible effect of an economic slowdown earlier in the year.
Westpac chief economist Bill Evans stated: ‘The index continues to indicate that we can expect growth in the Australian economy to stay below trend in the final quarter of 2014 and well into 2015.’
Tuesday… The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate continued to advance after Bank of England (BoE) Governor Mark Carney inspired optimism regarding a fall in UK inflation.
However, Wednesday could be a highly influential day for the GBP/AUD exchange rate with the release of Bank of England meeting minutes, UK Unemployment Rate, Employment Change and Weekly Earnings figures. Retail Sales stats will follow on Thursday and are expected to soften from 4.6% to 4.5% on the year in November.
Earlier… The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate recorded gains during Tuesday’s trading despite a hefty drop in UK inflation as the Bank of England (BOE) previously warned was possible.
The UK Consumer Price Index (CPI) fell from 1.3% to 1.0% in November, the biggest slowdown since 2oo2.
The fall in inflation has been accredited to the recent drop in oil prices which continue to tumble.
However, Bank of England (BoE) Governor Mark Carney put a positive spin on the commodity depreciation, saying: ‘The recent sharp fall in the oil price should support global and UK growth. It is a positive development, but it is also one that entails some risks to financial stability.’
Earlier… The UK The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate fell during Tuesday’s European session after the Bank Of England (BoE) released its latest stress test results.
The central bank showed that some of Britain’s largest banking institutions such as the RBA and Lloyds would barely scrape through another financial crisis, while others like the Co-Op would fail to sustain itself completely.
Although the BOE acknowledges that the banking system is far better than it was, there are still major concerns.
The BoE stated: ‘Recent misconduct and other operational failings have highlighted that rebuilding confidence in the banking system requires more than financial resilience. That, and changes to banks’ business models in response to commercial and regulatory developments, make it important for banks to continue to enhance the effectiveness of their governance arrangements.’
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate recorded losses towards the close of Monday’s European session as the effect of a cooling housing market weighed on the British currency. Furthermore, the siege in Sydney came to an end offering some stability for the ‘Aussie’ exchange rate.
The ‘Aussie’ was struck early in European trading hours after gunman Man Haron Monis took Lindt cafe workers and visitors hostage. The 49 year old had received political asylum in Australia in the 90s and is well known by police. Monis is currently on bail for a number of charges.
Mr Monis’ former lawyer Manny Conditsis commented: ‘His ideology is just so strong and so powerful that it clouds his vision for common sense and objectiveness. Hence participating in something as desperate and outrageous as this.’
Australian Dollar to US Dollar (AUD/USD) Exchange Rate Forecast to Tumble
The Australian Dollar to US Dollar (AUD/USD) exchange rate has been forecast to sink in coming months as the tumbling price of iron ore and a global slowdown continues to weigh heavily on the currency.
In the early part of the Oceanic session the ‘Aussie’ commodity currency dropped as hostages were taken in a Lindt cafe in Sydney’s financial district.
The Australian Dollar to US Dollar (AUD/USD) exchange rate was residing very close to fresh four-year lows on the news that a gunman was holding people in a cafe and forcing the hostages to hold an Islamic declaration of faith.
There is speculation that the event could be a terrorist attack; however, with an unknown amount of hostages taken and little known about the gunman, many are advising cautious hypothesising.
New South Wales Police Commissioner Andrew Scipione commented: ‘We have not yet confirmed it is a terrorism-related event. We’re dealing with a hostage situation with an armed offender.’
While five hostages have managed to escape, an unknown amount of people are still being held in the building.
Prime Minister Tony Abbott commented: ‘This is a very disturbing incident. It is profoundly shocking that innocent people should be held hostage by an armed person claiming political motivation.’
Some have speculated that the Islamic State group could potentially be behind the attack after previously threatening Australia—an event that saw Australia’s terror warning raised back in September.
However, the Australian Dollar could be extremely volatile in the rest of Monday’s trading with data thin on the ground the world over.
Analyst David de Ferranti stated: ‘It was expected to be a low-volume Monday with little in the way of data to move the market, so the volume spike in trading around the siege was noticeable.’
Meanwhile, the Pound softened after Rightmove House Prices contracted by -3.3% in the month of December. The disappointing December ecostat pulled down the annual figure from 8.5% to 7.0%.
However, the statistic not only shows the housing market is cooling, but also offers the Bank of England (BoE) time before having to hike interest rates.
Rightmove director Miles Shipside commented: ‘The Bank of England have worked hard through the Mortgage Market Review (MMR) to make sure things slow down. A steady market is a lot better because it stops personal indebtedness getting too high when people take out large mortgages to pay for every increasing values in property. A sensible upwards rend is traditional for a healthy market but things got a bit too froth last year and couldn’t continue.’
Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast
Over the rest of Monday’s session, UK CBI Trends Selling Prices and Trends Total Orders figures are unlikely to affect the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate that significantly.
However, as the event in Sydney unfolds, the Australian Dollar commodity currency will remain volatile and could fall rather dramatically if it is decided that the siege is an act of terrorism.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is trending in the region of 1.9011. The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is residing at 0.5262.