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Australian Dollar Exchange Rate Forecast - GBP/AUD Dives, Aussie Strengthens vs Euro (EUR), NZ Dollar (NZD) & US Dollar (USD)

September 1, 2014 - Written by Tim Boyer

The Pound to Australian Dollar (GBP/AUD) exchange rate made moves higher as the trading week started, in suit with its rise over last week.

Monday saw the Australian Performance of Manufacturing Index dip from July’s 50.7, to only 47.3 in August, whilst UK Manufacturing figures dropped unfavourably to its lowest point in 14 months.

The GBP/AUD exchange rate levels slowly climbed upwards, however with significant events for both currencies due to take place this week, the Australian Dollar may be able to claw back some of its losses.

The latest aussie levels within the forex markets are as follows:

- The Australian Dollar to Canadian Dollar exchange rate is trading up +0.01% at 1.01490 AUD/CAD.
- The Australian Dollar to Euro exchange rate is trading up +0.07% at 0.71124 AUD/EUR.
- The Australian Dollar to Pound exchange rate is trading down -0.03% at 0.56214 AUD/GBP.
- The Australian Dollar to New Zealand Dollar exchange rate is trading down -0.24% at 1.11417 AUD/NZD.
- The Australian Dollar to Dollar exchange rate is trading up +0.13% at 0.93419 AUD/USD.
- The Australian Dollar to Rand exchange rate is trading up +0.28% at 9.96913 AUD/ZAR.

Markit Manufacturing PMI Flops - Pound Sterlig (GBP) Feels the Effects of Dip
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Markit showed that the UK Manufacturing Purchasing Managers Index (PMI) fell in August, attaining only 52.5, short of the 55.1 forecast. Expert in the field David Noble stated: ‘UK manufacturers were walking rather than running in August as the sectors performance fell to a 14-month low and growth began to slow further. There is a distinct easing across the breadth of UK manufacturing, with growth in output, new orders and employment all reducing to a more pedestrian level.’ The Pound has softened in recent weeks; however the upcoming UK Construction, Composite and Services PMI due for release in the beginning of this week, may allow Sterling to be able to gain some stability against other majors after today’s stutter. Reserve Bank of Australia Governor Glenn Stevens is due to speak, following the release of Australian Gross Domestic Product figures on Wednesday, making it quite an influential day for the ‘Aussie’, which may lend some strength to it in the GBP/AUD exchange rate.

Australian Performance of Manufacturing Index Disappoints, AUD/GBP Exchange Rate Softens

The Australian Performance of Manufacturing Index showed contraction as it fell below the 50 threshold in August, at only 47.3 in comparison to July’s 50.7. Any movement above 50 shows expansion in the sector, whilst below suggests a shrinkage. Expert in the field Innes Willox suggests that the stubbornly high Australian Dollar is ‘maintaining the intensity of import competition.’ Willox continued: ‘To date we have not seen the surge in housing construction flow through to the manufacturing sectors traditionally linked to house building such as metal products and non-metallic mineral products. In part this appears to be due to higher levels of import competition and in part because the simultaneous reduction in engineering and construction is detracting from demand in these sub-sectors.’

The Reserve Bank of Australia are meeting for their Bank Rate decision which will be published on Tuesday, which economists believe will remain stagnant at 2.50, as it has done for over a year. Some however believe that an interest rate cut would help to aid the stubbornly strong ‘Aussie’ which has caused issues in the Australian economy for some time now. Investment expert Andy Gracey commented: ‘With unemployment heading up, inflation within the Reserve Bank’s target band, and the currency stubbornly high, it makes perfect sense to lower interest rates in 2014. The combination of contracting mining investment, a strong currency, an already indebted consumer, tighter fiscal policy and cautious companies raises the risk that the central bank may have to ease policy further.’

Furthermore the Bank of England is due to reveal their interest rate policy on Thursday which is expected to remain at the present 0.50%. The Bank of England Governor Mark Carney caused the Pound to rally in recent months following talk of interest rate hikes being close to occurring. Following this statement the Pound rose in popularity; however, Carney has become dovish since the initial rally, causing a slump in the Pound.

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