The GBP AUD exchange rate has started this week’s session holding just above the 1.6000 level.
Foreign Currency Market Update – GBP / AUD Update
Sterling surged against the Australian Dollar during last week’s session, taking the GBP AUD exchange rate to a new 7-month high of 1.6080. The upward move for the pair was driven by concerns regarding the future make-up of Greece’s government following the indecisive general election in the troubled Hellenic state just over a week ago. For much of the week, it looked like the ultra-left wing Syriza bloc might succeed in brokering an ‘anti-bail-out’ ruling coalition which would almost certainly see the country default on its debt commitments. The mere threat of this scenario unfurling caused appetite for risk to drain from global markets, sending the Australian Dollar lower.
Australia’s latest annual Budget Statement, which took place last Tuesday morning, elicited further downside pressure on the Aussie. Treasurer Wayne Swan, who delivered the statement, surprised many analysts by announcing that his Labour government was set to introduce the most widespread spending cuts and tax hikes in over 30 years in an attempt to balance the nation’s books before next year’s elections. Most economists agree that this looks like a case of Swan ‘cutting off his nose to spite his face’, as Australia is generally accepted to be in a reasonable fiscal position. Currency market participants voted with their feet following the announcement, by shifting their assets out of Australian Dollar-denominated assets.
The Aussie-positive effect of stronger than anticipated domestic employment data, released in the early hours of Thursday morning, was more than cancelled out by the Sterling relief rally triggered by the Bank of England’s decision, announced later on Thursday, that it would not be extending its Quantitative Easing programme.
The GBP AUD exchange rate has started this week’s session holding just above the 1.6000 level. The last time the pair visited this rate, during the latter half of November, it rapidly retraced to 1.5167 by the end of the first week of December. This suggests that GBP AUD currently resides in a region of some resistance, so a technical move to the downside can not be ruled out, particularly if the minutes of the most recent Reserve Bank of Australia minutes which brought a 0.50% cut in interest rates, due for release tomorrow morning, suggest that the loosening of monetary policy was a one-off action by the RBA. However, if Greece’s politicians fail to form a working coalition government before Thursday’s state opening of the country’s parliament, then GBP AUD may be left eyeing its 19-month of 1.6493.
Summary of major upcoming data releases that we think may move the market.
- The Australian Dollar came under pronounced selling pressure at the start of last week’s session
- The Pound climbed to its highest level for fourteen weeks against the Australian Dollar
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Kiwi surges 8% in four weeks
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Sterling looks highly vulnerable based on interest rates
- Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – Sterling rebounds from record lows