Bullish Trends for the Australian Dollar (AUD) as Lack of Interest Rate Cuts Encourages Resurgence for the Risk Currency
The early hours saw a significant turn-around for the ‘Aussie’ as the previously struggling currency was massively boosted by a combination of strong Retail Sales data and a lack of interest rate cuts from the Reserve Bank of Australia (RBA). Hawkish trading in the wake of this somewhat unexpected rally has prompted gains across the board for the commodity currency, with the AUD/GBP exchange rate shooting to a fresh weekly high of 0.4735.
Manufacturing PMIs dominate the outlook of the AUD/GBP exchange rate as China demonstrates worse-than-feared contraction while Australia and the UK both post growth.
Commodity Slump Pushed AUD/GBP Pairing to Seven-Year Low despite Disappointing UK Consumer Confidence Survey
As the global commodity market slump continues, with no signs of picking up in the immediate future, risk-sensitive currencies have remained dovish over the past week and the ‘Aussie’ (AUD) is no exception. A particularly underwhelming month-on-month Building Permits figure for June, -8.2% rather than the predicted -0.56%, did nothing to help the currency on Thursday and saw the AUD/GBP exchange rate slipping to a fresh seven-year low of 0.4650.
A lower-than-anticipated UK Consumer Confidence Survey saw Sterling (GBP) weaken on Friday, however, as the result signalled an undeniable decrease in optimism and suggested that the domestic economy might be weaker than previously assumed. Although it should be noted that July had been a month of particular unease, with George Osborne’s budget especially having an impact on the mentality of consumers, and the Pound soon rebounded to send the AUD/GBP pairing down to an even greater low of 0.4645 in the afternoon.
Manufacturing Growth Fails to Boost ‘Aussie’ (AUD) or Pound (GBP) and Prompts AUD/GBP Exchange Rate Fluctuations
Over the weekend the Chinese Manufacturing PMI was ultimately revealed to have been even lower than previously reported, rather than picking up an additional 0.1 as pundits had forecasted. Thus, in spite of a far more positive result for the Australian equivalent this morning, which rose over the previous month’s figure by a fair margin, the ‘Aussie’ entered a further downturn against most of the majors. Losing a lot of the ground it had managed to regain on Friday, the antipodean currency remains at the mercy of its struggling trading partner and the low prices of key metal exports.
Posting growth of its own, the UK’s Manufacturing PMI rose to 51.9 over the previous month’s 51.4, however this is not quite the coup it might appear as this result simply indicates that the previous downtrend has halted. An overreliance on the domestic market is being blamed for what appears to be a relatively stagnant manufacturing sector. Consequently the AUD/GBP pairing struck a high of 0.4674 this morning, before ultimately falling back once more.
Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Forecast: Upcoming Interest Rate Decisions Could Send Pairing to New Multi-Year Lows
Both the ‘Aussie’ and the Pound are waiting on significant data releases in the coming days, which could see a lot of movement for the exchange rate pairing. Australia will be publishing its Balance of Trade and Retail Sales for June, along with the Reserve Bank of Australia (RBA) Interest Rate Decision. With the expectation of potential rate cuts, traders may well move away from the Australian Dollar in the lead up to this announcement and the AUD/GBP exchange rate stands to fall to perhaps another four-week low.
Prior to the Bank of England (BoE) Inflation Report and Interest Rate Decision there is unlikely to be much movement led by Sterling. If the Monetary Policy Committee (MPC) should confirm expectations and indicate that members have this week started to vote for an increase the Pound stands to see a significant boost across the board. Potentially this could push the exchange rate still lower in the event of disappointing Australian data.
Current AUD, GBP Exchange Rates
At time of writing, AUD/GBP remains narrowly trending around 0.4669 while GBP/AUD is moving upwards in the range of 2.1405.