Pound Climbs against Australian Dollar (GBP/AUD) Exchange Rate as UK Data Boosts Pound, Commodity Prices Fluctuate

March 30, 2015 - Written by David Woodsmith

STORY LINK Pound Climbs against Australian Dollar (GBP/AUD) Exchange Rate as UK Data Boosts Pound, Commodity Prices Fluctuate

The Pound was able to advance against the Australian Dollar on Monday when commodity prices took a hit and upbeat UK data surfaced. The UK economy performed well when Mortgage Approvals surged in February. The January ecostat was downwardly adjusted to 60.7K, while the February figure climbed to 61.8K—a shade higher than the 61.5K expectation. However, the upcoming UK general election could potentially disrupt housing market activity, with many economists suggesting that a political shakeup could see the property market stutter. Furthermore, the Bank of England could also play its part in impacting the housing market. Industry expert Mark Harris stated: ‘The lack of inflation, and talk of an interest rate cut rather than a rise, could have an impact on people’s inclination to take on new debt.’

Meanwhile, the Australian Dollar was offered little favour when the price of iron ore dipped to a six-year low. The value of iron ore has tumbled by around 50% since last year, an event that’s pressured the ‘Aussie’ lower for some time. The fall in price has been largely accredited to weaker-than-expected Chinese demand. As China is both Australia and New Zealand’s largest trading partner, any developments in the nation can play a major part in Oceanic currency movement. Industry expert David Hynes stated: ‘It’s obviously under a fair bit of pressure with the Chinese steel market still weakening. To be honest, there aren’t any indicators to suggest we’ve come to getting close to the end of that trend. The short-term trend looks reasonably weak. Until we see a stabilisation of the Chinese housing market, it’s going to be tough going for iron ore.’

However, the People’s Bank of China has attempted to encourage more housing market activity by lowering the deposit rate on second properties. The Chinese central bank has been fairly active in its attempts to encourage growth. Another factor pressuring the Australian Dollar lower is the prospect of another interest rate cut. The Reserve Bank of Australia recently cut the cash rate by 25 basis points and has the potential to make another adjustment in coming months. Strategist Michael Turner commented: ‘Speculation that the RBA might be going in April instead of May... that’s probably helped the ‘Aussie’ move a tiny bit lower.’ If the central bank does make any further adjustments to borrowing costs, the Australian commodity currency could sink against a host of other majors.

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