GBP AUD Exchange Rate Softer as Australian Dollar Boosted by GDP

June 5, 2014 - Written by Ben Hughes

STORY LINK GBP AUD Exchange Rate Softer as Australian Dollar Boosted by GDP

During the European session the Pound Sterling to Australian Dollar exchange rate was trading in the region of 1.8061 GBP/AUD, just 0.05 per cent stronger than before the publication of Australian trade data. The ‘Aussie’ posted widespread gains earlier in the week as the Reserve Bank of Australia left interest rates unaltered as Australian GDP was shown to have expanded at a faster-than-forecast pace in the first quarter of the year. These advances were largely retained in spite of the fact that Australia recorded an unexpected trade deficit in April. The South Pacific nation had posted a surplus of 731 million Australian Dollars in March, and economists believed that this eased to a surplus of 510 million Australian Dollars in April.

However, Australia’s trade balance swung to a deficit of 122 million Australian Dollars in April due to a decline in exports. Any ‘Aussie’ losses occasioned by the report were modest.

Slight ‘Aussie’ movement was also occasioned by Chinese services and composite PMI reports. The composite measure returned to growth territory in May, rallying from 49.5 to 50.2, but the services measure slipped from 51.4 to 50.4.

A report published by Halifax this morning showed that UK house prices surged to their strongest level for six years.

The 3.9 per cent seasonally adjusted month-on-month increase was a lot higher than the 0.7 per cent gain envisaged.

Halifax mortgages director Stephen Noakes said this of the report; ‘Housing demand is still strong and continues to be supported by a strengthening economic recovery. However, there are signs of a revival in house building which should bring supply and demand into better balance and curb upward pressure on prices over the medium and longer term.’

The Bank of England has previously expressed concern over the strength of the UK housing market so this sign of house prices rising could encourage the central bank to reconsider leaving interest rates on hold until next year.

The Bank of England is due to deliver its rate decision at 12:00 GMT. The central bank is expected to leave interest rates at record lows for a 63rd consecutive month and to hold its asset purchase target at 375 billion Pounds.

The odds of the BoE making a different decision are very slim, so if they were to surprise investors intensive market movement would probably follow.

As the European Central Bank is expected to introduce stimulus at its own meeting (taking place at 12:45 GMT) that announcement may inspire currency volatility.

Whatever happens at today’s Bank of England policy meeting, further Pound to Australian Dollar exchange rate movement could occur before the weekend as a result of Australia’s AiG performance of construction index.

This week’s services measure surpassed expectations so investors will be hoping for another strong result.

The construction index came in at 45.9 in May, below the 50 mark separating growth from contraction and reflecting the patchy performance of Australia’s housing sector.

Of course UK trade data will also be of interest tomorrow.

Last month’s total trade balance report showed that the UK’s visible trade deficit narrowed as a result of higher exports, with the trade gap easing from 8.7 billion Pounds to 8.5 billion Pounds.

Additional currency market movement could occur before the weekend in response to the highly influential US non-farm payrolls report.

The Australian Dollar to Pound exchange rate is currently in the region of 0.5531. The Pound to Australian Dollar exchange rate is currently in the region of 1.8055. The Australian Dollar to US Dollar exchange rate was trading in the region of as of 0.9281

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