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Foreign Exchange Report : GBP AUD Rate Up Following Weak Australian Jobs Data, GBP NZD Rate Drops

June 9, 2011 - Written by John Cameron

The Pound Euro exchange rate (GBP EUR) is 1.1227. The Pound Dollar exchange rate (GBP USD) is 1.6410. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5507.

The Australian Dollar has been the major mover in the currency markets overnight following the release of a disappointing set of Australian labour market figures.

Investors shifted their funds out of the Aussie in their droves following the release of May’s Australian Employment Change figure during last night’s Asian session. The figure showed that only 7,800 new jobs were created in Australia last month; analysts had expected the figure to show that 25,000 new positions had been generated.

This soft jobs number is the latest in a series of disappointing Australian data releases which have included worse-than-expected trade balance, current account and Q1 growth figures, which were all released last week.

Analysts suggest that the Australian economy is suffering a dampening effect partly due to the historically high level of the Australian Dollar, which is making Australian exports less attractive to foreign markets.

Decreased aggregate demand in the economies of Australia’s key export partners has also had a negative effect on the real economy in Australia. Data released overnight shows that Japan’s GDP is currently contracting at an annualised rate of 3.5%, following March’s devastating Tsunami. Meanwhile, China’s central bank continues to tighten its domestic monetary policy in order to reign in domestic inflationary pressures. Both Japan and China are key Australian export partners, so their troubles are also Australia’s troubles.

Elsewhere, the Reserve Bank of New Zealand elected to maintain New Zealand’s Official Cash Rate at 2.50% overnight, as had been widely anticipated. However, the upbeat tone of Reserve Bank Governor Alan Bollard’s accompanying statement surprised analysts. Bollard stated that, ’the outlook for the New Zealand economy has improved’, and went on to project that the ongoing re-building project in Christchurch is set to add 2% to New Zealand’s GDP growth next year.

The net effect of last night’s Antipodean developments has been significant gains for the Kiwi against its Trans-Tasman sister currency; the AUD NZD exchange rate was trading down by over 1% at one point during last night’s Asian session. Further downside is possible for the Aussie if risk aversion takes a hold of global markets later today, due to the Australian Dollar’s relative yield advantage over the Kiwi.

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