UK data releases over the next five days are unlikely to provide much positive momentum for the Pound.
Foreign Currency Market Update – GBP / AUD Update
Another week, another multi-decade low for the GBP AUD exchange rate. Last Tuesday’s session saw the pair drop to 1.4618, its lowest level since 1985, eclipsing the previous week’s 1.4649, which had been the existing low. It was the 8th week on the spin that GBP AUD had broken to a significant new low, providing confirmation that the pair is firmly entrenched in a downtrend. November’s near-term high of 1.6057 now seems along way off.
The main risk event last week for GBP AUD came in the early hours of Tuesday morning, when the Reserve Bank of Australia surprised investors by announcing that it was maintaining its key lending rate at 4.25%. Most commentators had anticipated a 25 basis point cut in Australian rates, following a marked softening in Australian data over the past month. The RBA’s Quarterly Monetary Policy Statement, which followed last Friday, failed to elucidate the decision, simply observing that Australian inflation is expected to remain within its target range of 2.00-3.00% at least until the middle of next year. Meanwhile, Thursday’s Bank of England monetary policy decision saw the UK’s central bank increase the £275bn currently ear-marked for its asset purchase scheme, by a further £50bn. The extension to QE had been widely anticipated, so the negative effect on Sterling was limited. Thursday’s UK Industrial Production numbers for December disappointed, printing at -3.3% versus expectations of -3.1%. However, better than expected UK Manufacturing Production figures, released later on Thursday and Friday’s British Producer Price Index numbers, which showed that UK factory gate prices are rising at a higher rate than had been anticipated, provided some compensation.
*Denotes the importance of the data item *** being the highest level.
*** Tuesday’s UK CPI Inflation data for January is expected to show a marked drop from December’s 4.2%, to print at an annualised 3.6%.
*** Wednesday morning’s UK Unemployment figures for January will be closely-watched by analysts. An increase in British jobless claims of 3,000 is expected.
*** Wednesday afternoon sees the release of the latest Bank of England Inflation Report. Investors will be monitoring the report for clues on the future direction of British monetary policy.
** Friday morning’s UK Retail Sales numbers for January are expected to show a monthly contraction of 0.3%, following December’s positive 0.6% showing, providing the potential for selling pressure on the Pound.
** Tuesday sees the release of the NAB Business Confidence survey for January and the Westpac Consumer Confidence survey for February, in Australia.
*** Australian Employment data for January is penned for release in the early hours of Thursday morning. The figures are expected to show a pick-up in Australian job creation following December’s contraction.
To paraphrase Isaac Newton’s first law of motion, ‘a trend in motion is likely to continue in motion.’ This paragon remains as true in the markets as it is in the world of Physics, leaving little room for optimism for clients needing to purchase Australian Dollars any time soon, given the strong GBP AUD downtrend which is prevalent. With the GBP AUD exchange rate breaking to new multi-decade lows on an almost weekly basis and with the corrections which follow each downward move becoming increasingly tame, it would be a surprise if the GBP AUD exchange rate did not head lower again, breaking down through last week’s low of 1.4618 in the short to medium term. The Greek parliament’s passing of deeply unpopular austerity package last night, which will allow the debt-addled country to access the next €130bn tranche of bail-out funding from the EU/IMF/ECB ‘troika’, is likely to cause an increase in global appetite for risk at the start of this week, eliciting further support for the risk-sensitive Aussie. UK data releases over the next five days are unlikely to provide much positive momentum for the Pound, leaving clients purchasing Australian Dollars hoping for a major, (and as yet unseen), global catastrophe to cause a shift out of risk, taking the GBP AUD rate back towards the 1.6000 level once again.
- Pound to Australian Dollar Exchange Rate Forecast – GBP AUD Rate Continues To Trend Downwards
- Pound to Australian Dollar Forecast – The Pound broke down to a new multi-year low of 1.4686 against the Australian Dollar
- Australian Dollar Foreign Currency Exchange Rate Forecast – Commodity currencies firm on North African uncertaintly, high oil prices…
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Exchange rate hits 3 month high…
- Pound to New Zealand Dollar Forecast – The GBP NZD rate has held above last Wednesday’s near-term low of 1.9041