• Moneycorp currency Transfers
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    1. #291
      Monthly currency review is below – thanks.

      It was a totally average month for the Australian dollar. It weakened by 5.1% against the all-conquering British Pound, exactly the proportion by which, on average, the other dozen most actively-traded currencies fell. The Aussie faded by 0.5% against the NZ Dollar and it was down by a rather more significant 3% against the US Dollar.

      Political and economic developments in Australia were more than a little overshadowed by the goings-on elsewhere. America's presidential election delivered a result which, in terms of its surprise value, exceeded even Britain's vote to leave the EU. Investors' initially-negative thoughts on the matter quickly turned positive when they considered where his policies might lead. Tax cuts and increased spending on infrastructure, should they materialise, would logically mean greater government borrowing, higher spending, accelerating inflation and rising interest rates. The market decided that Mr Trump would be good for the US Dollar and they bought it enthusiastically.

      However, there was even more enthusiasm for the British Pound once Brexit-fatigue set in. Investors tired of selling Sterling simply on the back of rumour and guesswork. Whether Britain's departure from the EU will be good or bad for the economy remains an open question but, until the structure of that divorce becomes known, it is impossible for investors to make a considered judgment. Between Referendum Eve and the beginning of November the Pound fell by an average of 15.4%, losing 17.6% to the Aussie. In the last month it has recovered nearly a third of that loss as it seems speculative sellers have run out of reasons to carry on.

      The two worries for the Australian Dollar are interest rates and credit ratings. Former Liberal Party leader John Hewson, who also had a stint as an economist at the Reserve Bank of Australia, maintains that Australia will lose its AAA credit rating. He told Sky News that "The fact that we are going to lose the triple-A credit rating is a foregone conclusion; it's just a question of timing." Higher coal prices are helping but the government's budget has been in deficit since 2008 and Treasurer Scott Morrison does not see the gap being closed until at least 2021.

      At the same time there is renewed talk of RBA rate cuts. In the coming week the central bank will announce its monetary policy decision 24 hours ahead of the figures for third quarter gross domestic product. Whilst that chronology does not point to an immediate cut, GDP weakness could tilt the RBA towards consideration of the idea in the New Year. Less-than-perfect credit ratings and lower interest rates would be a clear threat to the value of the Australian Dollar.

    2. #292
      The financial new year got off to an upbeat start on Tuesday with share prices mostly higher and economic data around the world painting a generally positive picture. Currency movements were modest: the US and Australian dollars vied for the lead and Sterling was on average unchanged.

      Brexit shuffle

      Investors were unsettled by the resignation of Ivan Rogers, Britain's senior representative to the EU. Both he and his deputy will be leaving shortly before the government invokes the Article 50 process of leaving the EU. The inference is that his replacement will be more inclined to negotiate a "hard" Brexit.

      Rightly or wrongly the market consensus is that a "hard" Brexit, a complete break with Europe including departure from the single market, would be more hurtful to the UK economy than a "soft" Brexit, which would leave the country in roughly the same situation as Switzerland and Norway. The harder it promises to be, the harder investors are on the Pound.

    3. #293
      Sterling choppy despite FTSE gains

      The FTSE 100 has started 2017 at rapid pace and set a new intraday record high yesterday as the UK services sector saw its fastest growth since 2015 and exceeded expectations. Coupled with strong domestic sales witnessed by manufacturing firms, forecasts for Q4 GDP are that it could come in close to 0.5 percent, similar to the previous quarters in 2016, maintaining the resilience of the post referendum economy in the UK.

      It remains to be seen how manufacturing firms cope with pricing into 2017 as margins continue to be squeezed by the rising cost of materials. In addition UK retailer Next prompted UK retail sector shares to slump as they slashed profit forecasts for the current financial year.

    4. #294
      After Tuesday's strong performance it would not have been a surprise to see sterling giving back some of its gains yesterday. It didn't happen. The pound was, on average, unchanged on the day after the UK employment data left it unmoved.

      There was nothing at all wrong with the jobs numbers. Unemployment was steady at 4.8%, its lowest level since the global financial crisis. Jobseeker claims were down by -10k, having been expected to increase. Average earnings were up by an annual 2.8%, beating the 2.5% rise in the retail price index and the CPI's 1.6%.

      Investors were not overjoyed by the figures: the pound showed no reaction whatsoever. But the data were good enough to ensure that sterling held onto the advantage it had gleaned on Tuesday.

    5. #295
      Weekly update below – have a good weekend all.

      Although sterling was the undisputed leader of the major currency pack the antipodean dollars were not far behind. The Australian dollar took third place, losing four fifths of a cent to sterling and strengthening by four fifths of a US cent. E

      Economic data from Australia were vaguely supportive but not overwhelmingly so. Mortgage lending was respectable, consumer confidence inched higher and unemployment ticked up to 5.8% in December despite the addition of 13.5k jobs.

      The UK ecostats for inflation and employment were decent enough but it was the Prime Minister's Brexit speech that took sterling ahead. Its main points had been leaked the previous evening so investors were not shocked to hear that there would be a clean break - otherwise known as a hard Brexit. They were actively pleased to learn that there would be a transitional period and that parliament will have a vote on whatever deal is agreed with the EU.

    6. #296
      Pugnacious pound

      Despite a disappointing set of UK retail sales figures the pound is a touch higher, on average, than Friday's opening levels.

      Not even the merest glint of light was to be found among the retail sales data for December. Sales were down by -1.9% on the month and November's feeble increase was downwardly revised to -0.1%. Analysts are at a loss to explain the fall, other than to speculate that consumers had brought forward their Christmas purchases to Black Friday in November.

      Back to Brexit

      The focus of investors will turn this week from Trumpton to Westminster. Tomorrow at 0930am (UK time) the Supreme Court will deliver its judgment as to whether or not parliament must approve the activation of Article 50, the process of leaving the EU. On Friday the prime minister visits the new US president.

      The word on the street is that the Supreme Court will rule in favour of the plaintiffs and that there will have to be a vote on Article 50. Recent experience suggests that would be positive for the pound, in that it would increase the (exceedingly slim) chance of Britain remaining within the EU.

    7. #297
      The British prime minister's visits to the United States and Turkey and the US president's Muslim travel ban have made surprisingly little difference to exchange rates. Compared with Friday morning the pound is just about unchanged against the dollar, the lira and the other dozen most actively-traded currencies.

      GDP
      Provisional figures on Thursday for fourth quarter growth indicated a 0.6% expansion of Britain's gross domestic product in the fourth quarter of 2016. The UK number was a tick higher than expected.

    8. #298
      Yesterday, the UK Parliament took the expected step further towards activating Article 50 when the House of Commons signed off the Brexit bill to the upper house.

      Not much is happening at the moment, data wise, to move the exchange rate considerably - the UK production and trade figures come out tomorrow.

    9. #299
      Yesterday, Nicola Sturgeon (First Minister of Scotland) announced plans to trigger second independence referendum on Scotland's membership of the United Kingdom.

      There was an expectation this could weaken the pound but we’ve only seen minor moves so far.

    10. #300
      UK Prime Minister Theresa May will trigger Article 50 on Wednesday 29 March - starting the process of the UK leaving the EU.

     

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