The early hours of Saturday morning saw the release of further disappointing Chinese economic data, which revealed that activity in the Asian giant’s manufacturing sector had contracted by more than anticipated last month.
Foreign Currency Market Update – GBP / AUD Update
Sterling’s forward march against the Australian Dollar continued apace during the past seven days. Last week’s session brought five consecutive days of gains for the GBP AUD exchange rate, providing confirmation of the pronounced near-term uptrend which the pair has been on since it slumped to 1.4711 on 7th August. In truth, there was little in the way of risk event during the first four days of last week to dissipate the upward momentum which the pair has enjoyed over the past month. However, Friday’s session brought Ben Bernanke’s keenly anticipated speech at the Jackson Hole symposium of central bankers. Bernanke has used previous Jackson Hole statements to ‘pre-announce’ increases to the Federal Reserve’s Quantitative Easing programme, so his words were closely monitored by investors holding Australian Dollar-denominated assets for hints that an increase to the US’s asset purchase scheme might be on the cards. An increase to QE would have provided a boost for global equities markets, favouring the risk-sensitive Aussie Dollar. However, Bernanke steered clear of announcing an extension to QE, instead focussing on the grim state of America’s economy. The Fed Chairman described the state of the US’s domestic labour market as causing him ‘grave concern’ and talked of the ‘daunting challenges’ which lay ahead for the world’s leading economy.
The early hours of Saturday morning saw the release of further disappointing Chinese economic data, which revealed that activity in the Asian giant’s manufacturing sector had contracted by more than anticipated last month. These worrying figures combined with Bernanke’s doom-laden words to ensure that the Australian Dollar started this week’s session in reverse gear when the currency markets re-opened last night. GBP AUD had ended last week at 1.5371, but the drop-off in appetite for risk over the weekend saw the pair re-open considerably higher at 1.5447. The key risk event of note this week comes in the form of the Reserve Bank of Australia’s monetary policy announcement early tomorrow morning. Given RBA governor Glenn Steven’s assertion of last week that he is ‘cautiously optimistic’ regarding Australian economy’s future prospects, a near-term interest rate cut would appear unlikely. If the RBA’s accompanying text is positive, as appears likely, then the GBP AUD exchange rate could give up a portion of its recent gains before the weekend.
Summary of major upcoming data releases that we think may move the market.
- The past seven days have seen Sterling buck its recent run of losses against the Australian Dollar
- Sterling has continued its march forward against the Kiwi Dollar in recent sessions
- The Pound continued to drive forward against the Euro and the U.S Dollar
- The forward move for GBP ZAR over the past week has been driven by Rand weakness
- There has been considerable volatility for the GBP NZD exchange rate over the past seven days