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    Thread: The Pound vs Australian dollar


    1. #201

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      Latest currency update is below.

      By and large it was a good week for the commodity-oriented currencies but the Aussie was unable to squeeze maximum advantage from investors sentiment: although it strengthened by a cent and a half against sterling it was only able to hold steady against the US dollar. It went down by a cent against the NZ dollar, coming close to the long-term low it scored earlier this month.

      The minutes of the Reserve Bank of Australia's monetary policy meeting, published on Tuesday, did not do any obvious damage at the time but seem to have weighed on the currency. They confirmed that "further easing [lower interest rates] over the period ahead may be appropriate".

      It was probably that knowledge that made the Aussie unable to make the most of the US Federal Reserve's announcement on Wednesday when it told investors not hold their breath in anticipation of higher US rates.

    2. #202

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      The Australian dollar has weakened against the pound over the past 24 hours - this follows a decline in global commodity prices.

    3. #203

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      Australian dollar still weak today against the pound - interest rate announcement in Australia next week will be interesting.

    4. #204

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      A monthly currency review is below.

      Judged by its closest peer, the Australian dollar did not have a good month. It sank to its lowest level ever against the NZ dollar and began April little more than a cent above parity - one-for-one. The Aussie fared even less well against March's leading currency, the US dollar, falling by two and a half cents or -3.1%. However, it picked up a cent against sterling and added a (less-valuable) cent against the euro too.

      The Aussie started the month quite well. There had been a general expectation that the Reserve Bank of Australia would lower its benchmark interest rate from 2.5% to 2.25% in early March. When the RBA surprised the market by not making the cut the Aussie enjoyed a relief rally. A fortnight later the RBA rather spoiled things when the minutes of the policy meeting failed to rule out the possibility of lower interest rates later - and maybe not much later - this year. The comment was that "further easing [lower interest rates] over the period ahead may be appropriate".

      All the commodity-oriented currencies, including the Aussie and the Kiwi, received some support from the US Federal Reserve's toned-down guidance on US interest rates. Although the Fed no longer promises to be "patient" in taking US interest rates higher it was at pains to point out that it would not be impatient. It also reaffirmed that when rates do head higher they will do so very slowly.

      Behind all the fuss about interest rates the cold hard fact is that the Australian economy is finding it tough going as a result of the slump in demand for mining output. Iron ore provides the most striking example. Five years ago iron ore sold for US$170 a ton. A year ago it went for $115 a ton. At the time of writing it is down to $50 a ton. The government has been aware of the problem for a couple of years and is keen to "rebase" the economy away from mining but an exercise like that is not the work of an idle moment and the currency is feeling the pinch.

      It is not the only one. The euro staged a bit of a recovery in mid-March after rebounding from a 12-year low against the US dollar and a 7-year low against sterling but it is not out of the woods yet. In March the European Central Bank kicked off its quantitative easing programme which will involve printing €60bn a month until September next year. There is a heated ongoing discussion between the EU and Greece about whether or not Athens must stick to the terms of its bailout loans: it could possibly (though is not likely to) end up with Greece defaulting on its borrowings and leaving the euro.

      The US economy is no longer delivering the crowd-pleasing economic data that kept the Greenback in the lead last year and investors are fretting about next month's general election in Britain. UK opinion polls point to no overall majority, the worst possible case for investors who value strong government.

      The Aussie, from an economic and interest-rate standpoint, still looks the most vulnerable of the bunch but the others are also surrounded by question marks. The picture is far more complicated than it was a few months ago and it promises to become more so.

    5. #205

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      The performance of the Australian dollar over the eight-day week was a reverse of what it had done over the previous seven days. The Aussie strengthened by four and a quarter cents against sterling, by three cents against the euro and by one against the US dollar. It was unchanged against the Kiwi.

      Australian economic data had little to do with its success. The trade deficit was not quite as wide as forecast but it was still a deficit. Purchasing managers' index readings from the services and construction sectors pointed to increasing activity but on a scale of 0-100 they were only just in the growth zone at 50.2 and 50.1.

      However, the US dollar lost ground on news of much slower American jobs growth. And with the UK general election less than a month away the pound found itself under increasing pressure from political risk.

    6. #206

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      The Australian dollar has weakened slightly against the pound.

      Why?

      Poor trade data from China released – economic news from China can affect the dollar (China is a key trading nation for Australia).

    7. #207

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      Boost for the Australian dollar as strong employment figures released in Australia.

    8. #208

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      Weekly review below.

      The Australian dollar began the week badly and ended it well. Overall it weakened by two thirds of a cent against sterling and added nearly one US cent. It was unchanged against the NZ dollar.

      Monday's trade figures from China hurt both the antipodean dollars. They showed exports slumping by -15.0% with imports down by -12.7%. The data for China's gross domestic product, industrial production and retail sales hurt them again. The pace of growth in China slowed in the first quarter while production and sales were up by less than expected.

      The Aussie's get-out-of-jail card was Thursday's employment data, which were much punchier than expected. Not only were 37.7k jobs added during the month, February's 15.6k increase was revised up to 41.9k. Unemployment ticked down to 6.0%. The figures surprised and delighted investors and they reacted by buying the Aussie.

    9. #209

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      Weekly review below.

      The week's price action for the Australian dollar was defined almost entirely by central banks and monetary policy. It moved higher after the People's Bank of China said it was reducing the amount of capital banks must hold to back up their lending. The move is intended to stimulate the Chinese economy, which would be good for Australian exports.

      On Tuesday the Reserve Bank of Australia governor sent the Aussie south when he said in a speech that the possibility of lower interest rates "has to be on the table" and "the board has… clearly signalled its willingness to lower [the Cash Rate] even further".

      A day later the currency strengthened on the back of higher-than-expected inflation with the RBA's preferred measure, the "trimmed mean", accelerating to 2.3%. Higher inflation means less chance of a rate cut.

      The net result was that the Aussie lost a cent and a half to sterling and held steady against the US dollar.

    10. #210

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      The Australian dollar was in the back half of the major currency field, as was sterling. It lost a cent to the pound and more than three euro cents. The Aussie took a cent from the week's poorest performer, the US dollar.

      No top-tier Australian economic statistics were released during the week. The only figure of any interest to investors was the manufacturing sector purchasing managers' index. At 48.0 it indicated slowing activity for a fifth consecutive month. The Aussie did, however, get a boost from the Reserve Bank of Australia governor. He hinted in a speech that if the RBA cuts interest rates next week it would be the last such move.

      In the week ahead the principal risk to the Aussie's value against sterling will be Thursday's UK general election. It is easier to imagine a result that would damage the pound than one that would be positive for it.

     

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