The Pound vs Australian dollar

[John from Moneycorp]

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.

[John from Moneycorp]

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

[John from Moneycorp]

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

[John from Moneycorp]

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.

[John from Moneycorp]

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.

[John from Moneycorp]

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).

[John from Moneycorp]

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

[John from Moneycorp]

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.

[John from Moneycorp]

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.

[John from Moneycorp]

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.

[John from Moneycorp]

The Reserve Bank of Australia (RBA) have cut interest rates to a record low 2%. This news was widely expected.

 

This week could be a difficult one for the pound with much uncertainty over the UK Election on Thursday – for some time now, opinion polls have been showing a hung parliament is the most likely outcome.

[John from Moneycorp]

The Australian dollar remains strong against the pound currently - the interest rate cut earlier this week was expected and the signs are there won't be any future cuts in the short/medium term in Australia.

[John from Moneycorp]

It was a fairly busy week for the Australian dollar but not a spectacularly successful one. After covering four-cent ranges against the euro and the British pound it was, in the end, almost unchanged against both of them. The Aussie did manage to pick up one and a half US cents but only because the Greenback was the week's poorest major-currency performer.

 

The handful of Australian economic statistics did not give investors much to go on. NAB's barometer of business confidence was unchanged in April, there was a rebound in mortgage lending and the wage price index rose by 2.3% in the year to March. On Tuesday the government unveiled its budget, which met with modest approval but did not move the currency.

 

Next week's agenda is even more thinly-populated, with vehicle sales on Monday, consumer confidence on Wednesday and inflation expectations on Thursday. The Reserve Bank of Australia board minutes come out on Tuesday.

[John from Moneycorp]

Exchange rate looking good today for those transferring money from the UK to Australia - GBP/AUD creeping towards $2.

[John from Moneycorp]

It has been really good levels this week for those transferring money from the UK to Australia.

 

Both of the antipodean dollars had a rough week, suffering in almost equal measure. For the Aussie it meant a loss of two and a half US cents and a two-and-a-quarter-cent loss to sterling. It was not quite a one-way-street but the downward pressure seemed fairly constant.

 

The few Australian economic statistics were not a lot of help, with construction work falling in the first quarter and new home sales slowing. A sharp -4.4% quarterly fall in private sector capital expenditure was particularly damaging. The greatest cause for concern was the estimate that capital spending in 2015-16 will be 24.6% less than in 2014-15.

 

Along the way the antipodeans suffered collateral damage from some punchy American ecostats which kept alive investor's belief that US interest rates will begin to head higher before the end of the year. Strong US payrolls numbers next Friday would reinforce that belief.

[John from Moneycorp]

The interest rate decision, on Tuesday, from the RBA could have an impact on the GBP/AUD exchange rate.

 

Additionally, there is other economic news coming out from Australia which could affect the Aussie dollar (GDP for the first quarter).

[John from Moneycorp]

Poor retail sales figures have slightly weakened the Australian dollar against the pound.

[John from Moneycorp]

Weekly review of the Aussie dollar below.

 

The Aussie got off to a slow start, with no domestic economic data published last Friday and the Queen's birthday holiday on Monday.

 

Tuesday's 1% monthly increase in mortgage lending had minimal impact on the currency. On Wednesday the Reserve Bank of Australia governor said in a speech that the RBA is still "open to the possibility" of further interest rate cuts. His comment sent the Australian dollar lower but not for long, because Thursday's employment figures were much better than expected: 42k people found new jobs in May and the rate of unemployment fell to 6.0%.

 

With the RBA governor and the employment figures cancelling out one another the Aussie had only a mediocre week. It strengthened by half a cent against the euro and added third of a US cent but lost a cent to sterling.

[John from Moneycorp]

GBP/AUD exchange rate at great levels today for those transferring money from the UK to Australia. News from the UK regarding inflation was positively received by the markets.

 

If you are interested in transferring money and want to take advantage of the good GBP/AUD rate, visit here - http://www.pomsinadelaide.com/index.php?pageid=forex

[John from Moneycorp]

Relatively quiet over the past day or so in relation to the exchange rate - with no data released having any impact.

[John from Moneycorp]

Worth keeping an eye on Greece.

 

Risk remains over Greece lurching out of the single currency (the euro) - which has come to be known as Grexit.

 

If this was to take place, it could have an adverse affect on the Australia dollar – the dollar is a ‘risk’ currency therefore any globally uncertainty could see it go weaker.

[John from Moneycorp]

Currency review of June below.

 

The three Commonwealth dollars were the weakest among the major currencies in June. By far the worst result was the New Zealand's -9% decline but the Aussie's -3.5% fall did not look too clever either, especially as it involved a six-year low along the way. All told, the Australian dollar went up by five NZ cents and it lost one and a half US cents, one and a half cents to the euro and seven cents to the pond.

 

During the first couple of days of June the Aussie showed promise. Figures for the first quarter showed the Australia economy expanding by 0.9% over the three months, twice as much as Britain, three times as much as Euroland and infinitely more than the United States, where there was no growth at all.

 

Thereafter, if it was not a downward one-way street for the Australian dollar it was certainly a determined backward march almost until the end of the month. The retreat began after the trade figures showed a -6% fall for exports in April while imports went up by 4%. The currency did get the occasional break, such as a sharp rise in employment and a correction to the balance of trade at the beginning of July, but the economic data were broadly unhelpful.

 

Even more unhelpful was the Reserve Bank of Australia governor Glenn Stevens. He told an audience that "we remain open to the possibility of further policy easing". In other words, don't write off the possibility of another rate cut. His words were given added weight the following day when, out of the blue, the Reserve Bank of New Zealand lowered its own benchmark interest rate.

 

Meanwhile in Britain and the United States (though not in the euro zone) the talk was of how soon and how quickly the sterling and US dollar rates would move higher. Those increases might not be imminent but the mood of the RBA is still leaning in the opposite direction.

 

In the month ahead investors will be keeping an eye on China, where there is concern about the Shanghai stock market and the possible effect on the economy. At the end of June the People's Bank of China cut interest rates, apparently in response to falling share prices. The worry is that if the share price bubble pops instead of deflating slowly it will hurt the Chinese economy and therefore that of Australia.

[John from Moneycorp]

Weekly Australian dollar review below – thanks.

 

It was a messy week for the commodity-oriented currencies, principally because investors were twitchy about China and Euroland. In China the Shanghai stock index continued the plunge it began a month ago and in Greece the people's referendum rejection of its creditors' proposals for reform and austerity made it look more likely that the euro was about to lose one of its members. Then the Chinese government took unusual steps to support share prices and a volte face by the Greek government led investors to believe a deal was at hand.

 

As sentiment blew hot and cold the Aussie twice covered a four-cent range, weakening in response to bad news from China and Greece then strengthening after strong domestic employment data coincided with better news from abroad. In the end it lost a net one US cent and was down by two fifths of a cent to sterling.

[John from Moneycorp]

For any GBP/AUD buyers the exchange rate keeps improving, sterling strengthened a fair bit today.

[John from Moneycorp]

Weekly review below.

 

It was difficult week all round for the commodity-related currencies.

 

The Aussie got off lightest, losing half a US cent and falling by four and three quarter cents against sterling to a six-year low. (By way of consolation, the NZ dollar also touched its lowest level since April 2009 and the Canadian dollar hit a seven-year low.)

 

None of the Australian economic statistics was particularly troubling to the Aussie. A fall in mortgage lending did no damage and weaker consumer confidence was offset by improved business confidence. The problem was the same old one; Australia's economy is not at its brilliant best. By contrast, central bankers in Washington and London were telling congressional and parliamentary committees that interest rates are about to turn upwards, "this year" in the States and "around the turn of the year" in Britain.

 

Sterling achieved the week's best result and the US dollar took silver.