Foreign Exchange Report : GBP AUD Rate Gains Following Bleak RBA Statement, While GBP USD Trades Lower

July 5, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Report : GBP AUD Rate Gains Following Bleak RBA Statement, While GBP USD Trades Lower

The Pound Euro exchange rate (GBP EUR) is 1.1081. The Pound Dollar exchange rate (GBP USD) is 1.6043. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5023.

Yesterday saw a muted start to the week’s session in the currency markets, with investors eyeing key central bank rate decisions later in the week and paying limited attention to data releases and news items on the day.

One pair that did see some price action yesterday was GBP AUD, which continued its move away from its 26-year low of 1.4887, which it reached last Thursday, to break back above the key 1.5000 level. This move was partly technical in nature, with speculators taking profit at the bottom-of-the-range rates, but was also driven by further disappointing data releases.

Australian Retail Sales figures, released during yesterday’s Asian session, showed a surprise contraction, dropping from a healthy 1.2% in April to -0.6% in May, against analysts’ expectations of a n expansion of 0.3%. Australian Building Approvals data also disappointed when it was released around the same time, showing an annualised drop of 14.4% in Building Approvals, a leading indicator of Australia’s key construction sector.

Given the soft nature of recent Australian data releases, it came as no surprise when the Reserve Bank of Australia elected to maintain interest rates at 4.75% overnight. However, the accompanying RBA statement was once again of a dovish tone, catching market participants on the back foot. The RBA predicted that domestic growth was unlikely to be as strong as had been previously forecast and went on to raise doubts about the continued strength of global growth over coming quarters, hinting at a double dip recession. The statement went on to note that the historically strong Australian Dollar was having a dampening effect on Australian price rises and observed that global commodity prices have eased since the last RBA meeting.

Given these comments, an RBA rate rise would appear to be a long way off, meaning that there is potential for further upside for GBP AUD in coming sessions. This gloomy assessment by the RBA has caused overnight support for the safe-haven US Dollar, seeing the GBP USD rate ease off yesterday’s high of 1.6140 to touch 1.6030 overnight. Further downside is possible for this pair during today’s session, particularly if this morning’s UK PMI Services Sector survey disappoints.


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