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Pound To Australian Dollar Exchange Rate Up Following Weak Australian Building Approvals Data

August 30, 2012 - Written by John Cameron

Last night’s Asian session saw a tame performance from the region’s leading stock indices, with both Tokyo’s Nikkei 225 and Hong Kong’s Hang Seng giving up over 1% of their total value. The shift out of risk was partly driven by last night’s highly disappointing Australian Building Approvals data for July, which showed a massive month-on-month contraction of 17.0%. This was worse than analysts’ expectations by some considerable distance – best estimates before the figure were for a drop-off of only 5% from June’s number. Although buildings approval data is not considered to be a tier one release in any major economy, it is still closely-watched by economists as a leading indicator of the future strength of a nation’s economic activity.

The other factor behind the dip in appetite for risk over the past 12 hours has been an adjustment in investor expectations towards tomorrow’s Jackson Hole speech by Ben Bernanke. Hopes were high amongst the investment community in the early part of this week that the Fed Chairman might use the set-piece platform to repeat his trick of two years ago and pre-announce another tranche of Quantitative Easing for the beleaguered US economy. The main beneficiaries of such an action would be equities market participants, as the majority of ‘new money’ made available to investment banks via QE3 would find its way into global shares. Yesterday’s upward revision of the initial Q2 US GDP estimate form an annualised 1.5% to 1.7% is seen as making asset purchase scheme hints by Bernanke less likely.

The developments overnight have seen the GBP AUD exchange rate move upwards slightly to trade as high as 1.5333. Meanwhile, the negative performance from Asian stocks has so far failed to cause any pronounced strengthening of the Greenback – the GBP USD exchange rate touched 1.5840 in the overnight session. The downward move for the pair will come later today if the Dow Jones goes the way of its Japanese and Hong Kong counterparts last night.
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