Pound Aussie Exchange Rate Dips In Spite Of Negative Assessment Of The Global Economy By IMF, GBP NZD And GBP ZAR Also Lower

Published: Wednesday, 10 October 2012 16:00 BST - Written by Toni Johnson

STORY LINK Pound Aussie Exchange Rate Dips In Spite Of Negative Assessment Of The Global Economy By IMF, GBP NZD And GBP ZAR Also Lower

Today’s session in the currency markets has been marked by some interesting price action for Sterling crosses, in spite of a general dearth of tier one data releases and global risk events. Stock markets have continued to give up ground on the day, with London’s FTSE 100 trading down by almost half a percentage point by the middle part of the session, and continental Europe’s bourses showing similar movement. The shift away from risk-laden assets appears to be a knee-jerk reaction to yesterday’s comments from the International Monetary Fund which posited that risks to the stability of the global financial system have increased since the turn of the year.

However, in spite of the near-term ‘risk-off’ trading environment and yesterday’s encouraging UK NIESR GDP Growth estimate, which suggested that there had been a tangible pick-up in economic activity in the British economy during Q3, the Pound has managed to lose significant ground against the high-yielding South African Rand and Australian and New Zealand Dollars on the day. The Sterling Rand exchange rate has continued to trend downwards off its Monday high of 14.4442, which represented the pair’s highest level since the early part of 2009. This has seen GBP ZAR drop as low as 13.7794 – a significant pull-back. The fundamentals which took the pair towards the mid 14s remain the same, so it appears that the move is technical in nature and has been triggered by speculators ‘taking profit’ on existing open positions. The Pound to ‘Aussie’ exchange rate has shown a similar, if less pronounced, move lower, suggesting that the pair was ‘over-bought’ during the latter part of last week as investors over-reacted to a bad week for the Australian tender. The GBP AUD exchange rate has tumbled into the lower part of the 1.5600s on the day and if the prevalent short-term trend persists, then February’s 27-year low of 1.4555 may come in to play once again. Meanwhile, the GBP NZD exchange rate is also showing an appetite to head lower. A break back below the psychologically important 1.9000 level would send out a strong negative indicator for this pair moving forward.

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