Pound to Australian Dollar Forecast: The Pound’s recent rally against the Australian Dollar is rapidly running out of steam

Currency

Pound to Australian Dollar Exchange Rate Forecast - The Pound's recent rally against the Australian Dollar is rapidly running out of steamThe first half of this week’s session has seen further reasons ‘not to be cheerful’ for the world economy; yesterday’s comments from Spain’s Finance Minister Cristobal Montoro, bemoaning the fact that global credit markets were ‘effectively shut’ as far as his debt-addled country was concerned, provided renewed cause for concern.

Foreign Currency Market Update – GBP / AUD Update

The past ten days have provided further evidence that the Pound’s recent rally against the Australian Dollar is rapidly running out of steam. Apart from a brief visit above 1.6000 a week ago, GBP AUD has now spent the whole of the previous eight sessions residing in the 1.50s. This is particularly significant, given that the past week has seen a far weaker-than-expected set of US Non-Farms Payrolls figures released, as well as the announcement by the Reserve Bank of Australia that it was cutting its key lending rates by 25 basis points, following hot on the heels of May’s 50 basis point cut. Ordinarily, weak US labour market data, in combination with a tightening of Australian monetary policy, would cause a strong move against the Australian Dollar, sending the GBP AUD exchange rate sharply higher.

The currency market’s reaction to the Reserve Bank of Australia’s rate cut, which was announced early yesterday morning, was particularly telling. The GBP AUD exchange rate dropped to 1.5708, its lowest level for four weeks, in the immediate aftermath of the RBA announcement, as the Aussie Dollar benefitted from a mini-rally. This suggested that a significant number of investors had been expecting that rates would be trimmed by more than a quarter of a percent.

The first half of this week’s session has seen further reasons ‘not to be cheerful’ for the world economy; yesterday’s comments from Spain’s Finance Minister Cristobal Montoro, bemoaning the fact that global credit markets were ‘effectively shut’ as far as his debt-addled country was concerned, provided renewed cause for concern. However, GBP AUD has continued to drift lower. As the old market adage states, ‘what should go up and doesn’t go up, can only come down’. The pair has now broken above the 1.6000 level on four separate occasions since August of last year, but on each occasion has failed to hold above this level. The risk now is that we have seen a ‘key reversal’ for GBP AUD and that it will now trend lower towards mid-February’s 27-year low of 1.4555 in the short-to-medium term.

Heads Up

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

Related posts:

  1. Foreign Exchange Daily Insight – The pounds gives up recent gains
  2. The past seven days have seen Sterling buck its recent run of losses against the Australian Dollar
  3. A weakening of the Australian Dollar saw the GBP AUD exchange rate rally to 1.5294
  4. Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – AUD stable as stocks rebound…
  5. Pound Sterling to Australian Dollar Foreign Currency Exchange Rate Forecast – No rate hikes from RBA or BOE…

Leave a Reply