Outlook For GBP AUD, GBP NZD & GBP ZAR More Positive As Risk Aversion Is Forecast

Modified: Monday, 1 April 2013 12:20 BST - Written by Ben Hughes

STORY LINK Outlook For GBP AUD, GBP NZD & GBP ZAR More Positive As Risk Aversion Is Forecast

Yesterday was a public holiday across the majority of the Western world, meaning that there was limited trading in the foreign currency markets. However, it was a normal session for Asian market participants, meaning that there was price movement for many of the world’s major currency pairs.

The Pound fared reasonably well against the other majors on the day. However, it was a slew of data from Asia, released during Monday’s Far Eastern session, which shaped market movement. Global stock indices across Europe and North America had ended the final session before the Easter shutdown on a real high, as institutional investors expressed their relief at an apparent calming of the Cyprus debt situation by getting involved in risk-laden assets in a big way. The broad-ranging S&P 500 index in the US ended Thursday’s session up by 0.4% on the day. This sent it to its highest ever level at 1,569, eclipsing its previous record high of 1,565, which it broke to in the second week of October 2007 when the full horror of the sub-prime mortgage crisis was yet to be felt.

However, Sunday night’s session caused a significant scaling back of appetite for risk from institutional investors. This was triggered initially by a weaker than anticipated showing from both the Q1 Tankan Large Manufacturers and Tankan Non-Manufacturing surveys in Japan. The mood in Asia deteriorated as the session progressed, when the March edition of the closely-watched PMI Manufacturing sector survey was released in China. The gauge of activity in this key sector of Asia’s largest economy showed at a lower than anticipated 50.9. The downbeat mood which these three pieces of data elicited amongst investors saw Tokyo’s headline Nikkei 225 index give up 2.12% of its value on the day and heaped pressure on risk-sensitive currencies including the Australian and New Zealand Dollars along with the South African Rand. This sent the Pound Australian Dollar exchange rate (currency : GBP AUD) briefly back above 1.4600, which now appears to be a key short-term level of resistance for the pair.

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