Pound to Australian Dollar Exchange Rate: GBP to AUD Lowers Further Despite Weak Aussie

July 21, 2014 - Written by Tim Boyer

STORY LINK Pound to Australian Dollar Exchange Rate: GBP to AUD Lowers Further Despite Weak Aussie

The Australian Dollar exchange rate complex (AUD) dropped against the majority of its most traded peers (including Euro, Pound Sterling & US Dollar) at the start of the week after investors grew concerned over the stability of the South Pacific nations economy after data showed that China’s housing market is cooling. Today, the pound to australian dollar exchange rate is 0.45 per cent lower at 1.80931 GBP/AUD (current as of 23rd July 2014)

China is Australia’s largest trading partner so any negative news out of the world’s second largest economy often puts pressure upon the ‘Aussie’.

“Aussie has reached its peak against a few currencies, maybe Euro, in the short term. Aussie was the darling for the last month. I think you’re going to see some reversion to the mean where things like Euro-Aussie, Sterling-Aussie, catch up a little bit”, said Peter Gorra, head of foreign exchange trading in New York at BNP Paribas SA.

House prices in China have fallen steadily causing some of the wealthiest Chinese to cut and run as they look for better reruns overseas. The move is a sign of fading hopes that the once smoking hot property market in China will not bounce back anytime sooner.

Liu Shijin, deputy director of the Development Research Centre of the State Council, says he believes the housing market is facing a "historical turning point." New analysis is suggesting investments into the housing sector aren't likely to see annual growth of anymore than 5% in the coming years. The latest government figures show home prices here in China have continued on a downward trend through this past month.

New home prices in 55 of the 70 major cities monitored have shown a month-on-month drops through June, compared with 35 in May. However, on a year-on-year basis, new home prices in most cities are still higher.

The Chinese speculation sent the Australian Dollar lower against the Euro, US Dollar and other major peers.

Also weighing upon the ‘Aussie’ was the lack of demand for perceived riskier commodity based assets. The cause of the risk aversion was increased concerns that tensions between the West and Russia escalated in the wake of the shooting down of a Malaysian airliner on Friday. Concerns that harsher sanctions will be imposed upon Russia spooked investors who expect that further measures will likely have a negative knock on impact upon the Eurozone and wider global economy.
Monitors from the Organisation for Security and Cooperation in Europe were granted some limited access to the crash site in Ukraine on Saturday, a day after the organization complained "visibly intoxicated" gunmen blocked their way to the site.

Worries over the situation in Gaza and Iraq are also weighing upon market sentiment.

Pound Sterling weakened but forecast to strengthen later this week

The Pound was also weakened by the reduced market sentiment and the lack of market moving economic data releases. The UK currency is likely to shake off Monday’s weakness as the week progresses as economists expect this week’s UK GDP data will show that the UK is now the fastest growing G-7 economy.

According to forecasts the GDP report will show that UK economic output will surpass the peak seen in 2007 and will likely increase pressure upon the Bank of England to raise interest rates before the end of the year.

“The story continues of a pretty consistent and fast rate of growth,” said David Tinsley, a former BOE official who’s now an economist at BNP Paribas in London. “Policy makers will need to think about tightening. We’re getting close to the point where the first MPC member votes for a hike.”

GBP to Aus Dollar Exchange Rate Update - 22/07/2014

The Pound fell against the rallying Australian Dollar (AUD) on Tuesday after Reserve Bank of Australia Governor Glenn Stevens failed to mention the currency in a major speech to the Anika Foundation.

Stevens said that he was happy with the RBA’s current monetary policy and his lack of mention the strong Aussie Dollar went some way to easing investor nerves regarding a possible drop.

The Pound is likely to regain its losses later in the session if the latest CBI data adds support to expectations that UK GDP data will come in strongly at the end of the week.

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