Pound to Australian Dollar Exchange Rate Forecast – The forward move for GBP AUD was triggered by the news that four large US retail banks had failed the most recent Federal Reserve stress test

Written by on March 19th, 2012

Pound to AUD Exchange Rate Forecast - The forward move for GBP AUD was triggered by the news that four large US retail banks had failed the most recent Federal Reserve stress testIn spite of last week’s test higher, GBP AUD starts this week lodged in the 1.4900s, within 4c of its 27-year low.

Foreign Currency Market Update – GBP / AUD Update

For the fourth week in succession, last week’s high on GBP AUD was higher than the previous week’s. The pair briefly eased back above the 1.5000 level for the first time since the second week of January, to touch a weekly high of 1.5025 on Wednesday.

The forward move for GBP AUD in the middle part of the week was triggered by the news that four large US retail banks, including Citigroup, had failed the most recent Federal Reserve stress test, due to concerns over the strength of their balance sheets. This took the edge off institutional investors’ appetite for riskier assets, causing a shift out of the Australian Dollar. The ‘risk-off’ trading environment was added to by Wednesday night’s statement from the US Federal Reserve, which dropped heavy hints that there would be no further Quantitative Easing in the States for the time being. This was bad news for equities markets, which have been buoyed by the availability of easy money in recent years.

However, the Aussie Dollar ended the week on a firmer footing following the release of the Reserve Bank of Australia’s Quarterly Board Bulletin in the early hours of Thursday morning, which steadied frayed nerves. Global equities markets further recovered their poise on Thursday when the IMF announced that it would provide the final €28bn required for Greece to access its next €130bn of ECB/EU bail-out funding. Disappointing UK Jobless Claims figures on Wednesday added to the downside pressure for GBP AUD in the second half of the week.

In spite of last week’s test higher, GBP AUD starts this week lodged in the 1.4900s, within 4c of its 27-year low. With Greece having seemingly staved off its debt crisis for now and investor sentiment on the up, a revisiting of this key interim floor at 1.4555 seems possible in the near-term. Conversely, any suggestion from the Reserve Bank of Australia in tonight’s minutes that it is considering a domestic interest rate cut later in the year could see GBP AUD re-establish itself in the 1.5000s.

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Summary of major upcoming data releases that we think may move the market.

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