Pound to Australian Dollar Exchange Rate (GBP/AUD) Forecast Focus on UK/Australia Employment

June 6, 2014 - Written by David Woodsmith

STORY LINK Pound to Australian Dollar Exchange Rate (GBP/AUD) Forecast Focus on UK/Australia Employment

Thursday proved to be a volatile one for the currency markets. While the Bank of England’s decision to leave interest rates unaltered failed to cause a stir, the European Central Bank’s interest rate decision had a much stronger impact. The central bank finally took the plunge and took the action it had been threatening for months. The introduction of unprecedented stimulus measures, including a negative deposit rate, caused an immediate spike in the market as investors ditched the Euro in favour of higher risk assets. In the hours which followed the ECB announcement the Australian Dollar, New Zealand Dollar, Indian Rupee and South African Rand all benefited from an increase in risk appetite. Although the Euro later recovered much of its losses, the Australian Dollar remained buoyed against its US and UK peers. In the opinion of senior currency strategist Jane Foley; ‘If you have a central bank that’s moving toward more easing like the ECB it just gives another green light towards the high-yield market. If we look back at what huge amounts of easing from various central banks have done in recent years it has promoted asset-price inflation and confidence into high-yield markets’.

Over the course of Australasian trading the ‘Aussie’ experienced minimal movement, even as the Australian Industry Group’s (AiG) Performance of Construction index for Australia showed that the sector remains in contraction territory. The measure did advance from 45.9 to 46.7 but it still falls short of the elusive 50 mark separating growth from contraction. However, there were positives to be derived from the report, such as the fact that domestic home building is booming. The house building gauge surged to 54.4 last month, helping to counteract a drag in commercial construction. The commercial construction index slipped to 34.8 points. AiG Public Policy Director Peter Burn observed; ‘The rebalancing of the construction sector is gathering pace with a further decline in engineering construction in May partially offset by healthy expansions in house and apartment building. Commercial construction on the other hand is struggling to sustain momentum after some promising signs earlier in the year.’

Pound Sterling (GBP) Pressured by Trade Report

While the Australian Dollar was barely affected by the domestic construction report, the UK’s trade balance figures did cause the Pound to soften slightly against its peers. The trade data showed that a 1.5 per cent decline in exports caused the UK’s trade deficit to widen to 8.9 billion Pounds in April from 8.3 billion Pounds the previous month. A trade deficit of 8.7 billion Pounds had been expected by economists. Imports climbed by just 0.8 per cent in April. The decline in exports was largely due to a drop in medical supplies and pharmaceutical chemicals.

Although there are no further UK or Australian reports to focus on before the weekend, fluctuations in the GBP/AUD pairing could still occur as a result of the highly-influential US non-farm payrolls report. The employment measure is expected to show that the US economy added over 200,000 positions for a fourth consecutive month. If this proves to be the case it would support the argument for the Federal Reserve introducing an interest rate increase before next year.

Pound Australiian Dollar GBP/AUD Forecast for the Week Ahead

Next week isn’t scheduled to be quite as data heavy as the last five days have been but notable GBP/AUD movement is still likely to occur. The reports which may pack the biggest punch include UK and Australian employment figures, due out on Wednesday 11th and Thursday 12th respectively.

The Australian Dollar to Pound exchange rate is currently in the region of 0.5561. The Pound to Australian Dollar exchange rate is currently in the region of 1.7981. The Australian Dollar to US Dollar exchange rate was trading in the region of as of 0.9348.

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