Pound Australian Dollar Report – GBP AUD Rate Drops Following Poor Australian Trade Figures, While US Currency Weakens

5 Apr 2011 at 9 AM - Written by John Cameron

STORY LINK Pound Australian Dollar Report – GBP AUD Rate Drops Following Poor Australian Trade Figures, While US Currency Weakens

The Pound Australian Dollar exchange rate (GBP/AUD) is 1.5651. The Pound US Dollar exchange rate (GBP/USD) is 1.6158.

Australian Trade Balance figures released overnight provided considerable cause for concern for investors holding Australian Dollar denominated assets. February’s figure shocked the markets by showing a monthly deficit of AUD205m against expectations of a surplus of AUD1.2bn. The data release also revealed that January’s surplus had been downwardly revised from AUD1.875bn to AUD1.433bn.

Last month’s Australian trade figure are the worst for over 12 months and show a rapid decline from the record trade surplus of AUD3.465bn which was reached in June 2010.

Analysts have attributed the negative trade figures to Australian Dollar strength. The Aussie has traded to its highest level against the US Dollar since it was freely floated 29 years ago, during recent sessions. This has led to Australian exports being priced out of the markets, whilst foreign imports are more keenly priced in the domestic market.

It was no surprise when the Reserve Bank of Australia opted to maintain interest rates at 4.75% in the early hours of this morning. The trade figures left the RBA with little scope for any rise. The combined effect of the Australian trade figures and the RBA announcement has been Aussie weakness, with the GBP/AUD rate gaining over 0.50% on the day already.

Meanwhile crude oil prices broke to a new 30 month high overnight as fears continue regarding future supplies in major oil producing nations. Rising prices should see the GBP/CAD and GBP/NOK rates drop, while spikes in oil prices traditionally cause selling pressure on the US Dollar.

There was better news for the US Dollar yesterday when Fed Chairman Ben Bernanke stated that US policy-makers needed to watch inflation ‘extremely closely’. Bernanke’s rhetoric has become increasingly hawkish in recent weeks following improving US economic data and fears over the effects that the continuing commodities rally will have on domestic wages and prices. If Fed members continue to peddle a hawkish line, then another test of 1.60 on GBP/USD can not be ruled out.

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