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    Thread: The Pound vs Australian dollar


    1. #251

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      The Aussie was full of Christmas cheer as December commenced, reaching a 6 month high against sterling. In Santa’s sack was some respectable Australian economic data, which showed stronger activity in the manufacturing sector, continuing growth in retail sales and faster growth in gross domestic product. He may as well have delivered the dovish news that the RBA would keep rates on hold until at least February, such was the positive impact it had on the currency – the GBP/AUD exchange rate was pushed to 2.0352.

      Lurking around the corner was the Grinch in the form of ECB President Mario Draghi who, in contrast to his recent rhetoric, announced that the central bank wouldn’t be increasing the amount of money injected into the eurozone economy each month, under their quantitative easing programme. As speculation mounted in recent weeks that the bond-buying scheme would be expanded in December, investors were inclined to sell off their euros and buy commodity currencies such as the Australian dollar, for profit purposes. However, this sharp U-turn saw investors reverse their positions as the ECB under delivered. This served to more than halve the Aussies earlier gains.

      The Australian dollar came under further downward pressure following a dramatic slump in commodity prices. Fresh signals of slowing demand from China prompted base metal prices to slide, with iron ore in particular plunging to its lowest value in a decade.

      Positive employment figures led to a period of volatility for the currency, with GBP/AUD exchange rates shifting almost 4 cents from high to low. The official unemployment figure was expected to show a drop to 6% but the actual figure of 5.8% was healthier than expected, and helped boost market confidence in the Aussie.
      One of the most widely expected decisions by a central bank in recent times, saw the US Federal Reserve raise the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 per cent and 0.50 per cent. In doing so the central bank made the US the first country in the western world since the financial crisis to raise interest rates. The Australian dollar fell as low as 71.77 US cents – a loss of one cent – after the announcement, but then quickly recovered thanks to the FED’s accompanying statement about future policy, which suggested that any further rate rises were likely to be “gradual”, and dependent on the rate of inflation.
      The Aussie managed to defy falls in oil prices and weakness in US stocks thanks to negative UK and US data. UK Public Sector Net Borrowing rose from 6.7 billion to 13.6 billion, surpassing the forecast 11.1 billion deficit. And the UK’s GDP forecast dropped from 2.3% to 2.1% year-on-year (YoY). Faltering US Durable Goods orders, with no growth posted for November after the rate of 2.9% in October, saw the US Dollar weaken. Consequently the Australian dollar picked up one US cent, as well as the three and a half cents it took from sterling.

      The Aussie held steady during the stagnant holiday period, with scant economic data or events driving price action, as we bid farewell to 2015.
      Looking ahead to 2016, the impact of falling commodity prices is likely to catch up with the Australian Dollar, which has so far managed to remain remarkably impervious to drops in the price of key Australian exports.

      RBA interest rate announcements will be closely monitored, with Australia predicted to be the third modern economy, after the US and the UK, to raise interest rates – although we could see a tightening of monetary policy towards the end of the year before this occurs.

    2. #252

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      Latest weekly review below, have a good weekend everyone – thanks.

      Financial markets have not enjoyed an auspicious start to the new year.

      A sell-off in the Shanghai stock market unnerved investors, as did the Chinese authorities' clumsy efforts to support equity prices and an 11-year low for oil. The result has been a flight to quality, with investors seeking refuge in the safe-haven currencies, including the euro and the US dollar, and offloading those related to energy and commodities. Helped by better-than-expected employment data the Australian dollar managed to dodge that bullet and it has outperformed its peers, strengthening by one and a half NZ cents. It is still down by a cent against the US dollar though.

      Sterling, meanwhile, has been held back by evaporating hopes of higher UK interest rates and uncertainty about the looming referendum on Britain's continued EU membership. That has kept it unchanged on the week against the Aussie.

    3. #253

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      Negative news for the pound today.

      The governor of the Bank of England, Mark Carney, ruled out an immediate rise in interest rates because of the turmoil in the global economy and weaker UK growth.

    4. #254

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      Australian dollar weekly review below - thanks

      Among the major currencies sterling was the biggest loser. Even to start with, investors were none too keen on it but they really took flight when a speech by the Bank of England governor pushed back even further expectations for higher UK interest rates. The Aussie was not able to make much headway during the first part of the week but it was helped on its way by the BoE governor and again the same day by the Bank of Canada's failure to make the rate cut expected by many investors: a lower Canadian rate might have encouraged a similar move by the Reserve Bank of Australia.

      Towards the end of the week the commodity-oriented currencies all received a boost - as did global equity prices - when the European Central Bank and the Bank of Japan both hinted at increased monetary stimulus. Overall the Aussie strengthened by four and a half cents against sterling and it added two thirds of a US cent.

    5. #255

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      Australian dollar is slightly weaker today - this is due to comments that interest cuts may take place soon in Australia.

    6. #256

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      The monthly currency review is below – thanks.

      The New Year is a time for celebration and positive feelings about the future. As the saying goes, ‘Out with the old and in with the new’. Unfortunately for the Australian dollar however, it was a case of more of the same as 2016 got underway. With concerns about slowing Chinese economic growth and a slump in the price of oil continuing to weigh on investors, the Aussie came under further pressure – a trend that is likely to continue over the coming months.

      Expectation that ongoing Chinese economic woe could trigger further interest rate cuts by the RBA to help bolster the domestic economy were tempered by the central banks governor Glenn Stevens, who stated that they will remain on hold until February at least. Interpreted as a sign of strength, this caused the Aussie to strengthen significantly against sterling.
      Ongoing concerns over volatility in China and declining oil and equity prices resulted in investors seeking a flight to safety – turning to safe-haven currencies, having offloaded commodity based currencies such as the Aussie. However, buoyed by better-than-expected employment data – figures showed that unemployment remained at 5.8% against expectations of a rise to 5.9% – the Australian dollar managed to rally.

      As hopes of a UK interest rate hike diminish and speculation surrounding the outcome of Britain's in/out EU referendum mounts, the Australian dollar has strengthened against sterling – dropping from 2.08 to 2.03.

      Expectation of further interest rate cuts by the RBA in the near future were dealt a further blow when the Bank of Canada failed to set the tone and make a much anticipated reduction of their own – a lower Canadian rate might have encouraged a similar move by the Reserve Bank of Australia.

      Commodity-orientated currencies and global equity prices received a welcome boost following hawkish rhetoric from the ECB and the Bank of Japan, who both hinted at further monetary stimulation. Overall the Aussie strengthened by four and a half cents against sterling – aided by a dovish tone from the BoE around a UK rate hike – and it added two thirds of a US cent.

      With the Australian Open in full swing the ‘risky’ commodity-orientated Aussie resembled a tennis ball in the full throws of a rally, as it was batted back and forth – it was bought, sold, bought, sold and bought again. Supported by the Bank of Japans surprise decision to cut its deposit rate below zero; and mounting speculation that U.S. interest rate hikes will be made at a slower pace than originally indicated. Causing GBP/AUD rates to fall to their lowest levels since May last year.

      Will sterling make a slight recovery as we move into February? Potentially, if the impending Australian Trade Balance and Export figures show a fall owing to the slowdown in China.

    7. #257

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      Weekly currency review is below – thanks.

      It was a good week for equities, a good week for oil and a good week for energy- and commodity-related currencies. There were no cold hard facts to justify the swing in sentiment: it was simply that investors figured that their previous bearishness had been overdone. Sterling ploughed its own lonely furrow, weakening on most fronts. In large part that was because of uncertainty created by today's European Council meeting that will allegedly decide Britain's future in the EU.

      The Aussie did reasonably well as a result of the improved optimism among investors, strengthening by two cents against sterling and holding steady with the US dollar. Its performance was spoiled, however, by some less-than-inspiring employment data: Australia unexpectedly lost 8k jobs in January, pushing unemployment up from 5.8% to 6%.

    8. #258

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      Exchange rate creeping below 1.90 now.

    9. #259

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      Good (and expected) news for the UK yesterday - the central bank voted against cutting interest rates.


      Gave the pound a little boost. Not a massive change in the GBP/AUD exchange rate though with the pound overall remaining weak.

    10. #260

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      Recurring theme but the pound is still weak. Wasn’t helped this week with the news of the decline of Britain’s steel industry.

     

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