Australian Dollar Exchange Rate (AUD) Weakens vs Pound Sterling (GBP), Dollar (USD) & Euro (EUR)

Modified: Tuesday, 17 June 2014 09:01 BST - Written by David Woodsmith

STORY LINK Australian Dollar Exchange Rate (AUD) Weakens vs Pound Sterling (GBP), Dollar (USD) & Euro (EUR)

The Pound Sterling (GBP) made gains against the Australian Dollar (AUD) exchange rate on Monday after the Bank of England’s Deputy Governor said that he would welcome a rise in interest rates as it would suggest that the UK economy is returning to normality.

As of Tuesday, the Australian Dollar exchange rate has weakened yet further against the key global currencies with the Pound Australian Dollar exchange rate trading 0.48pct higher on the day at 1.81643 GBP/AUD, the Euro to Australian Dollar exchange rate is trading up 0.34pct at 1.45051 and the US Dollar to Aussie Dollar rate priced 0.47%pct up at 1.06978.

Bean’s comments add to Bank of England Governor Mark Carney’s comments made last week at his Mansion House speech given last Thursday.

“There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced. It could happen sooner than markets currently expect,” Carney said.

Bean told a Sunday Newspaper that the first rate hike "will be a symbolic step, because it will be an indication that we are on the road back to normality". Although he continued to stress the Bank line that "rates will rise gradually to a level materially lower than the pre-crisis average".

As a result of the increased expectations for a Bank of England rate rise the UK currency managed to make gains against all of its major peers. Against the Euro it advanced to a 19-month low, against the US Dollar it breached the $1.70 level for the first time since 2009.

Australian Dollar holds gains vs US Dollar

The Australian Dollar meanwhile was confounding economist expectations as it held onto its recent high levels against the US Dollar and other major peers despite a fall in demand for riskier assets as the situations in Iraq and Ukraine continued to spook the markets.


The conflict in Iraq looks likely to escalate as the USA considers holding direct talks with arch regional rivals Iran over the situation in the country. Concerns are mounting that a new Gulf War could ensue to drive out the Sunni insurgency destroying much of the country.

Massacres of Iraqi soldiers by the Terrorist ISIS forces could spur the world to take military action in the country. Extremists captured key cities, including Mosul and Tikrit, last week, but several towns have now been retaken from the rebels.

The US has deployed a number of warships to the region including the aircraft carrier USS George HW Bush suggesting that air strikes could be launched. So far the US administration has ruled out a return of US troops to Iraq.

Concerns are also rising over the situation in Ukraine. Russia’s state owned gas company Gazprom has warned that it will cut Ukraine’s gas supplies after the country failed to pay its debts by a 6am deadline which passed this morning.

Almost 15% of gas used in Europe comes from Russia via Ukraine, which is why EU members are taking a particularly close interest in the stand-off, observers say.

Despite all of the worries generated by geopolitical tensions the Australian Dollar has taken economists by surprise by remaining fairly strong against the US Dollar.

“It still looks like investors globally are still fairly enamoured by the yields on offer in Australian assets. Until volatility levels rise for whatever reason, no one really is willing to be shaken out of an Aussie Dollar position. That’s the overriding story and it hasn’t really changed over the last few weeks. If the geopolitical situation does get worse and it causes a bit more of a scare on global equity markets, that could be a source of market volatility,” said the co-head of FX strategy at National Australia Bank Ray Attrill.

The ‘Aussie’ is likely to experience volatility tomorrow if the latest RBA policy meeting minutes shows that policy makers want the currency to weaken in order to aid the nation’s exporters. Investors will also looking at the minutes for clues as the Central Banks next interest rate decisions.

Latest Pound & Australian Dollar exchange rates - 16/06/2014

The Pound Sterling to Australian Dollar exchange rate is trading up +0.48% at 1.81643 GBP/AUD.
The Euro to Australian Dollar exchange rate is trading up +0.34% at 1.45051 EUR/AUD.
The US Dollar to Australian Dollar exchange rate is trading up +0.47% at 1.06978 USD/AUD.
The Australian Dollar to Euro exchange rate is trading down -0.34% at 0.68941 AUD/EUR.
The Australian Dollar to Pound Sterling exchange rate is trading down -0.48% at 0.55053 AUD/GBP.

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