The tail end of the week saw widespread losses for the Australian Dollar (AUD) following unfortunate unemployment data. The jobs report showed that unemployment hit a 12-year high in July. Its saving grace, however, was the dismal performance of the Pound which allowed the ‘Aussie’ to recover some ground.
Strong Chinese trade data also helped to support the ‘Aussie’, however the positive impact of this report was short-lived following Australia’s negatively revised inflation report.
Following this week’s less-than-impressive factory output data, Sterling (GBP) was further weakened by a lack of movement from the Bank of England in terms of interest rates and asset purchase targets. Sterling’s difficulty has increased as investors speculate on the possible implications of Scottish independence.
Both currencies in the pairing were also feeling the impact of the bullish US Dollar (USD) this week.
Next week will post some significant data for the Pound. UK Jobless Claims Change, Average Weekly Earnings and the ILO Unemployment Rate will all have an impact on Sterling. In particular the Unemployment Rate is one to watch; the lower the rate the more reduced the level of slack in the UK economy and the greater the odds of the Bank of England increasing interest rates.
The most significant data concerning UK economics will be Friday’s Gross Domestic Product report (GDP). GDP is an indicator for broad overall growth. Positive GDP readings are generally bullish for a given currency, while negative readings are bearish. Due to the untimeliness of this report and because data on GDP components are available beforehand, the actual GDP figure is usually well anticipated. However there is currently no forecast figure from the previous year-on-year posting of 3.1%.
There are also several reports due out next week which could have a significant bearing on the Australian Dollar. The reports to be most aware of include the the ANZ Roy Morgan Weekly Consumer Confidence Index, the NAB Business Confidence report, House Price Index, Australia’s Westpac Consumer Confidence Index, Wage Cost Index and Average Weekly Wages. Whilst these reports are all important relative to the Australian economy, the GBP/AUD pairing is much more likely to be changed by the coming UK data as outlined above.
Due to the strong trading relationship between Australia and China, Chinese data will also influence proceedings. Year-on-year Retail Sales will be important. From a previous posting of 12.4% economists have forecast a slight growth to 12.5%. Similarly important will be the data concerning year-on-year Industrial Production. The previous figure posted was 9.2% and is forecasted to drop slightly to 9.1%.
We forecast that the direction the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate will take this week will largely be dictated by the UK’s employment figures.
UPDATED 09:25 GMT 12 August, 2014
Pound to Australian Dollar Exchange Rate Dips
On Tuesday the Pound to Australian Dollar (GBP/AUD) exchange rate shed over 0.1% following the publication of Australia’s House Price and Business Confidence reports.
The Business Confidence measure advanced from 8 to 11 in July while the NAB gauge of Business Conditions rallied from 2 to 8.
Australia’s House Price Index detailed a 1.8% quarter-on-quarter increase in the second quarter (more than the 1.0% increase anticipated) and the index was up 10.1% on the year – also beating expectations for a result of 9.3%.
The modest decline in the Pound to Australian Dollar (GBP/AUD) exchange rate was also caused by a disappointing Like-for-Like Sales report from the British Retail Consortium. With UK employment figures set for publication tomorrow, further movement in the pairing can be expected.