As this week’s session gets underway, stock markets are staging a concerted recovery thanks to a calming of the situation in the eurozone.
Foreign Currency Market Update – GBP / AUD Update
A dearth of significant data releases from the UK and Australia didn’t stop there being significant price action for the GBP AUD exchange rate during last week’s session. The pair broke to its highest level since mid-June on Wednesday, tipping the scales at a heady 1.5643, as institutional investors shifted out of riskier assets. The flight to safety was triggered by concerns that the eurozone’s long-running debt saga was about to escalate: violent anti-austerity protests on the streets of Athens and Madrid caused analysts to question the region’s willingness to accept stringent government cuts and tax hikes. These fears saw Spanish debt yields spiral towards the danger zone and triggered a sell-off in global stocks – bad news for the Australian Dollar.
However, the GBP AUD rate had eased to 1.5498 by Friday afternoon, in spite of Thursday’s slight upward revision to the UK’s Q2 GDP growth data from the previous estimate of -0.5% to a finalised -0.4%. Although the adjustment was unexpected, it failed to have any tangible effect on GBP AUD – the fact that Britain’s economy shrank by four tenths of a percentage point in the three months to the end of June is hardly positive news for the Pound.
As this week’s session gets underway, stock markets are staging a concerted recovery thanks to a calming of the situation in the eurozone. With the protestors largely having packed away their placards and headed for home, equities investors have once again concentrated on the hundreds of billions of Pounds worth of new money which is likely to filter through to them via the US’s Quantitative Easing policy. The return of a ‘risk-on’ trading environment has sent London’s FTSE 100 share index higher by over 1% so far today and triggered a test lower for the GBP AUD exchange rate. If the Reserve Bank of Australia uses tomorrow morning’s policy announcement to reveal that it is maintaining its key lending rate at 3.5%, then the Aussie may pick up further support, sending GBP AUD back down towards last month’s low of 1.5279. If the Bank of England announces an increase to the UK’s Quantitative Easing scheme on Thursday, then GBP AUD could experience further downside before the week is out.
Summary of major upcoming data releases that we think may move the market.
- Price action for GBP NZD during last week’s session was dictated by two data releases on opposite sides of the world
- Pound to Australian Dollar Forecast: The latter part of last week brought significant volatility for the Australian Dollar
- The Pound makes significant gains against the majors despite a slowdown in the UK housing market according to the Rightmove House Price indicator
- Last week’s session proved to be a highly significant one for the GBP NZD exchange rate
- Pound to Euro, US Dollar exchange rate: Sterling found itself supported by a stronger-than-expected Consumer Price Index figure