The Pound vs Australian dollar

[John from Moneycorp]

Both the antipodean dollars had a reasonably successful weekdespite a noticeable setback on Wednesday when the US Federal Reserve confirmed that it was halting its money-printing stimulus programme. Yet again it was sentiment, rather than any compelling argument from the domestic economic data, that took them ahead. A greater relaxation about the global outlook made investors better-disposed to commodity-related currencies. The Aussie strengthened by a cent and a half against sterling and the euro.

[John from Moneycorp]

Monthly currency review is below, thanks.

 

October was a difficult month in financial markets. For the Australian dollar it meant frequent changes of direction. Their net effect was not huge: the Aussie is unchanged on the month against sterling and down by just two thirds of a cent against the US dollar. But it covered a range of six cents against sterling and its weekly reversals were unnerving to investors.

 

The Aussie was not alone in its erratic movements. A series of economic and political events and news made life interesting for just about every currency. Among the majors it was the Japanese yen which delivered the weakest performance while the US dollar led the field. In both of those cases it was central bank money-printing that made the difference: the US Federal Reserve brought its six-year programme of quantitative easing to an end just as the Bank of Japan cranked up the presses.

 

The Reserve Bank of Australia was not involved in the debate, at least as far as monetary policy was concerned. It has never needed to go down the money-printing road because Australia largely avoided the nastiness of the global financial crisis and subsequent recession. The RBA's benchmark interest rate has stood at a record low of 2.5% since last summer and, according to the RBA's latest statement, is likely to remain there for another two years.

 

However, RBA Governor Glen Stevens is not one to hide his light under a bushel when it comes to opinions about the value of the Australian dollar. And he still thinks it is too strong. Investors have heard the story often enough but every time he reminds them it is too strong there is a flurry of selling.

 

Otherwise, investors are once again reluctant to sell the Aussie. They sold it in September, when it lost roughly 5% to sterling and 6% to the US dollar, but last month they were apparently happy to pick up the considerably higher returns which the Australian dollar still offers.

 

There was the occasional wobble though. Some had an external cause, such as when the International Monetary Fund downgraded its global economic forecast for the third time this year or when the Chinese economic data came in below expectations. Others had a very domestic origin. The most notable of these in October was when, for a second month, the Australian employment data were wildly adrift from analysts' forecasts. In September there had been a massive increase in employment. The October numbers showed an almost equally huge fall. The Australian Statistics Bureau acknowledged there had been mistakes but could not say where the errors lay.

 

So the Australian dollar soldiers on, talked down by its central bank but broadly respected by investors. Although upward progress might be difficult, reports of its demise are clearly exaggerated.

[John from Moneycorp]

The Australian dollar is weaker against the pound.

 

This is mainly due to negative economic news coming out of Australia.

 

Australia's trade deficit more than doubled in September.

[John from Moneycorp]

All of the commodity-related currencies lost ground over the week and the Aussie suffered more than most. It lost two and a half US cents and was down by three and ahalf cents against sterling.

 

China was partly to blame. Purchasing managers' index there showed private sector business activity growing more slowly in October.

 

The Australian ecostats were not desperately helpful either. Manufacturing and services sector firms both reported a continuing slowdown in business. Building permits slumped by -11.0% in September. The 1.2% monthly increase in retail sales was a pleasant surprise to investors but the 24k increase in employment did not go down too well, even though it was bigger than the expected 10kincrease.

 

After a couple of months of apparently random numbers investors seem to have grown distrustful of the Australian employment data.

[John from Moneycorp]

The antipodean dollars were the week's top performers by quite a margin. The Aussie took second place behind the Kiwi, strengthening by one and a quarter US cents and by four and a half cents against sterling.

 

To a large extent it was a matter of the Greenback and the pound falling, rather than the Aussie rising. The US dollar's problem was a smaller-than-expected monthly rise in employment. Sterling's problem was more deep-seated; the Bank of England forecast that UK inflation would fall to 1% and remain down there until late next year. If correct, it would mean a 12-month delay to the first interest rate increase.

 

The Australian economic data were decent enough and there were some better than expected figures from China. But it was mainly an interest rate play. Australian rates are higher than those of other major currencies and NZ rates are a lot higher.

[John from Moneycorp]

There is speculation of a trade deal being announced this week between China & Australia - if this happens (and it's still to be confirmed), it could strengthen the Australian dollar against the pound.

[John from Moneycorp]

The Australian dollar has weakened slightly aginst the pound - the dollar's weakness followed the price of iron ore (Australia's top export earner) slipped to its lowest level in five years.

[John from Moneycorp]

The Australian dollar got off to a good start this week, strengthening by more than a cent against sterling last Friday, but gave back all that and more as the week progressed. It lost two cents to the euro, one and a half cents to sterling and was down by half a US cent.

 

That was some achievement, because neither the pound nor the Greenback was in favour with investors last week. They seemed to think the US dollar had risen far enough and they were inclined to sell any spikes. As for sterling, they were still smarting from the postponement of higher interest rates.

 

However, the economic data from China were not very good and there were no domestic ecostats to offset them. Australian vehicle sales were down by -0.5% on the year and of the two forward-looking economic indicators, one pointed to contraction and the other to zero growth.

[John from Moneycorp]

The Australian dollar remains weak against the pound - therefore it is decent levels for those looking to send money to Australia.

 

The Aussie dollar has been weak mainly due to poor economic growth figures in Australia and also disappointing data from China (a key trading country for Australia).

[John from Moneycorp]

Hi everyone

 

Wishing you all a Merry Christmas and a Happy New Year!

 

Best wishes

 

John & The Moneycorp Team

[John from Moneycorp]

Happy New Year everyone.

 

Australian dollar currency overview and the latest news is below – thanks

 

From the beginning of December until Christmas the Australian dollar continued the retreat that had begun in mid-November. On the month it lost four US cents and fell by five cents against sterling. In the second half of December the Aussie touched five-year lows against the pound and the US dollar. At the end of the month it scored a nine-year low against the NZ dollar.

 

So December was not exactly the best month ever for the Aussie. It was hampered by weak economic data from China and the domestic statistics were none too sharp either. The Chinese economy is not exactly slowing: the People's Bank of China predicts it will expand by 7.1% this year. But it is growing more slowly and the country is less hungry for Australia's iron ore and coal exports. China is also importing less from other countries. In November imports were down by -6.7% from the same month in 2013. Reduced Chinese demand continues to depress commodity prices. The Reserve Bank of Australia's Commodity Index has been on the decline since the middle of 2012. In December it was down by -21.2% on the year. All in all, Australia is exporting less stuff and charging lower prices for it. That means reduced demand for the Australian dollar at a commercial level.

 

Investors are not so keen on the Aussie either. They certainly found little encouragement to buy it among the month's Australian economic statistics. Unemployment ticked up to 6.3%. Manufacturers, builders and services firms all reported dwindling activity. The balance of trade was in deficit for a seventh consecutive month. Australia's economy expanded by only 0.3% in the third quarter of the year, the slowest pace of growth since 2011.

 

With that in mind, the Reserve Bank of Australia is in no mood to increase interest rates. If anything, its next move is likely to be a rate cut. That prospect makes investors even less inclined to buy the Aussie.

 

The coming year could mean more setbacks for the Australian dollar, at least against the British pound and the US dollar. American interest rates are cautiously expected to start moving higher in the first half of the year, with UK rates following in the second half. However, it is possible that the Australian dollar will strengthen against the euro, as it did in 2014. Investors might not much care for the Aussie but they are even more disenchanted by the euro.

[John from Moneycorp]

The pound has weakened recently against the Australian dollar.

 

Weak economic data (service sector) from the UK has led to the pound being weaker – also data has been released showing the housing market has slowed down.

 

This has led to some worries about the overall performance of the UK economy although some believe we should not be getting too worried yet following the recent data releases.

 

For Australia – the monthly trade data for November was better than expected which also boosted the Aussie dollar.

[John from Moneycorp]

The pound has become slightly stronger against the Australian dollar in recent days.

 

Why?

 

Decline in commodity prices – eg Copper which is a large mineral export for Australia.

 

Inflation figures from the UK released overall helped the pound - Britain is still doing better than much of Europe in relation to this.

[John from Moneycorp]

The exchange rate has been quite volatile this week – overall the Australian dollar has been much weaker against the pound. Good news for those looking to transfer money to Australia in the short term.

 

A lot of focus has been on the ECB decision on their Quantitative Easing programme. Additionally, there is some speculation that the RBA may look to cut interest rates in Australia – this would likely have an impact on the Australian dollar making it weaken further.

[John from Moneycorp]

The Australian dollar is still under pressure however was boosted slightly by economic news released.

 

Higher-than-expected inflation data in Australia from this morning. Whilst they put headline inflation slightly below forecast at 1.7%, the "trimmed mean" - a favourite measure for the Reserve Bank of Australia - more than doubled from 0.3% to 0.7%. Investors saw that increase as reducing the downward pressure on the potential cut on interest rates in Australia.

[John from Moneycorp]

The Australian dollar is much weaker against the pound today.

 

Speculation has intensified that the Reserve Bank of Australia may consider an interest rate cut in early February. Growth forecasted in Australia appear to be relatively negatively and all this is leading to a weak Aussie dollar.

[John from Moneycorp]

The Australian dollar remains weak against the pound. As mentioned above, there is little economic news coming out anywhere to help boost/strengthen the dollar.

 

The GBP/AUD exchange rate is currently at good levels for those who are transferring money to Australia.

[Randc]

Hi John

do you think it will hit 2.0

i read it may go 2.1

holding on because of interest rates and election

All advice welcome

thanks

[John from Moneycorp]

All depends on what news comes out next and when do you need money over in Australia - the Australian dollar has had a tough time of it recently hence the exchange rate improving for those moving money to Australia - why not set a target rate, within your timeframe, and if it hits these levels you can transfer a portion of your money over?

 

A round up of the week's news is below.

 

It was not quite a one-way-street south for the Australian dollar but it did not get many lucky breaks. The only thing really in its favour was that when the Reserve Bank of Australia governor and his deputy gave speeches during the week they did not labour the point about an over-valued currency.

 

The Aussie's unlucky break was Thursday's employment data. They revealed a loss of 12k jobs in January and showed a jump in the rate of unemployment to 6.4%, matching the 12-year high of last July.

 

The Australian dollar's situation worsened later the same day when the Bank of England governor said that UK interest rates could rise "more quickly than implied by current market yields". The pound moved higher as a result of his observation. On the week the Aussie lost half a US cent and it fell by two and a quarter cents against the pound.

[John from Moneycorp]

The weekly review of the Australian dollar is below.

 

With most investors' concentration focused squarely on the bailout squabble between Greece and Germany they did not have much time to spare for the Australian dollar. They might have given it more attention had there been any domesticeconomic statistics to change their view but there were none. The Aussie did receive some help from overseas though. In the minutes of the US Federal Reserve's monetary policy meeting there were hints that the Fed might be less keen to begin taking interest rates higher and that the Funds Rate would be kept close to zero "for a longer time".

 

There was also an observation that the strong US dollar is "a persistent source of restraint" on exports. The prospect of low US rates for longer was positive for most commodity-related currencies, including the Aussie. It strengthened by a fifth of a US cent and went up by a third of a cent against sterling.

[John from Moneycorp]

Australian dollar has strengthened against the pound following the RBA keeping interest rates on hold - some analysts expected a further rate cut.

[John from Moneycorp]

The Australian dollar remained strong throughout the day following the RBA interest rate announcement.

 

One aspect to bear in mind is the US dollar which could have an impact on the AUD. If the US economy gets stronger along with any interest rate rise in the US then investors could turn more to USD rather than AUD.

 

With a UK election also not too far away there could be fluctuating times ahead for the GBP/AUD exchange rate.

[John from Moneycorp]

Following the interest rate announcement in Australia, the Aussie dollar remains strong against the pound.

[John from Moneycorp]

Weekly update is below.

 

The Australian dollar was one of the week's top-performing major currencies. It strengthened by two and a half cents against the euro and the pound. It was unchanged against the US and Canadian dollars, but only by accident.

 

There was no coherent message from the Australian economic data. New home sales and building permits rose strongly but the construction sector reported a fourth month of slowing activity. The manufacturing sector shrank in February while the services sector expanded. Gross domestic product was in line with forecast, expanding by an annualised 2.5% in the fourth quarter of 2014.

 

The real boost to the Aussie was the Reserve Bank of Australia's decision on Tuesday to keep its benchmark interest rate unchanged at 2.5%. There had been a general expectation that the RBA would cut its Cash Rate to 2.25% so its failure to do so sent the currency higher.

[John from Moneycorp]

The Australian dollar has weakened slightly.

 

This followed comments from Reserve Bank of Australia Assistant Governor Christopher Kent – he said the Australian dollar is still "relatively high".