Monthly Currency Update - GBP/AUD August 09

[Guest HIFX plc]

Hi All,

 

Here is an update of what’s been happening in the Currency Markets throughout July with the Ozzie Dollar.

 

GBP/AUD: The start of July saw sales figures jump by 1.0% in May, twice the market forecast, as government give-aways and historically low borrowing costs fuelled spending on the high street. However, the Aussie Dollar eased broadly as appetite for higher-yielding currencies and riskier assets waned following a bleaker than expected US jobs report. Aussie losses were compounded after Australia’s trade deficit doubled in May as a steep fall in the value of commodity exports overshadowed soft imports, likely just a taster of things to come as swinging price cuts for coal and iron ore feed through.

 

As expected, the RBA left interest rates on hold at 3.0% for the third consecutive month but left the door open for further cuts later in the year if economic and financial conditions do not support a return to a sustainable recovery. On a positive note, consumer sentiment (+9.3%m/m) jumped to its highest level in 19 months as government handouts and low interest rates bolstered consumer confidence however, it could yet prove fragile given that the employment situation looks vulnerable.

 

The AUD found support mid month from the release of the minutes from the RBA’s MPC meeting earlier this month which painted a cautiously optimistic picture of the Australian economy. Meanwhile, the CPI (Consumer Price Index) data painted a mixed picture with the headline number showing prices rising at a decade low 1.5%y/y.

 

Last week the Reserve Bank of Australia signalled that it was prepared to raise interest rates as the economy recovered. The bullish comments added to the recent rise in investor confidence that has seen global stock markets rally aggressively. Glenn Stevens, Governor of the RBA suggested the Australian economy could well be coming out of recession in advance of most other developed countries. He added that Australian interest rates had likely troughed and dismissed the commonly held notion that rising unemployment would trigger further cuts. Stevens said that the RBA “doesn’t have to wait for unemployment to peak before raising rates” and that the rise in unemployment had been a little slower than earlier feared, and the effect of the more positive factors for households had, so far, outweighed fears of unemployment.

 

In Australia, it’s a huge week ahead with June and Q2 retail sales, July employment, Q2 house prices and June’s trade figures.

 

Current Central Bank Rates:

 

Australia (Reserve Bank): 3.00% (Next Meeting 1st September)

UK (Bank of England): 0.50% (Next Meeting 6th August)

 

Highs & Lows of July:

 

High: 2.0984

Low: 1.9830

A movement of 5.82%

 

Difference this would make on £200k

 

High: 419,680 AUD

Low: 396,600 AUD

 

A difference of 23,080 AUD.

 

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.

 

Regards

 

 

 

Jon Sermon

HiFX