Australian Dollar (GBP/AUD) Exchange Rate is Forecast to Continue Negative Trend

Modified: Wednesday, 2 July 2014 09:49 BST - Written by Ben Hughes

STORY LINK Australian Dollar (GBP/AUD) Exchange Rate is Forecast to Continue Negative Trend

The Australian Dollar (AUD) exchange rate continues a negative trend against the Pound Sterling (GBP), with forecasts lpredicting further losses.

The British currrency pushed higher against the Aussie Dollar (AUD) on Monday but gains were restrained due to the release of a report which showed that the number of Mortgages approved in the UK fell last month as new lending measures began to bite.

The Australian Dollar exchange rate was weakened as market attention turned to upcoming domestic events and as a report released today showed that new home sales in the country fell more than forecast last month. According to the official data the number of new homes bought in May declined by 4.3%, a sharp drop from April’s increase of 2.9%.

Investors are also focusing on events due to take place later in the week such as the Reserve Bank of Australia’s July monetary policy meeting. All eyes will be watching to see whether the bank will alter interest rates. Economists are expecting Governor Graeme Wheeler to leave the baseline rate unchanged yet again as he tries to hammer home his plans for a stable outlook. The markets agree that a rate rise is unlikely with just 1% of economists forecasting a rate change.

“In terms of the RBA, very little change is likely with another statement reiterating a ‘period of stability’ in rates widely anticipated,” CBA strategists said in a report. “However, RBA governor (Glenn) Stevens may provide more colour when he speaks on Thursday.”

The RBA is however likely to try and talk down the ‘Aussie’ as it continues to remain stubbornly high against the majority of its major peers. Any talking down will be to lessen the high currency’s impacts on the nation’s export and tourism sectors.

A high ‘Aussie’ is likely to put people off visiting Australia for holidays and reduces the appeal of Australian goods. Another thing that policy makers will be considering is the fall in commodity prices. Iron ore, Australia’s biggest export continues to trade lower than earlier in the month.

Despite the upcoming RBA meeting some economists are forecasting that the Australian Dollar will continue to rise against a number of peers. Against the US Dollar for example the currency is expected to reach as high as 97 cents before the end of 2014.


“The Australian economy is improving and the fear of a sharp domestic mining investment slowdown is receding, foreign purchases of Australian bonds have picked-up, the Reserve Bank of Australia appears to have stopped talking down the Australian dollar after shuffling to a neutral bias, the global economy is improving and Australia’s terms of trade are not under large downward pressure, and the US dollar is likely to remain soft,” said economists at Commonwealth Bank.

Pound Sterling weakens on British mortgage data

The Pound meanwhile was weakened after a report showed that British lenders issued the lowest amount of mortgages seen in almost a year. The amount of mortgages approved dropped from April’s figure of 62,806 to 61,707 in May. The data suggests that the UK property market is on the verge of a slowdown.

Earlier in the year the Bank of England warned that an overheating property market was the biggest threat to the UK’s economic recovery. A similar report issued by the British Bankers Association last week showed that the number of approvals fell to the lowest levels since August 2013.

GBP/AUD Dollar forecast

Tomorrow is a big day for the Australian Dollar as the latest Australian retail sales, services index and building permits data are all due for release.

Data out of China will also offer support if it comes in positively. Chinese Non manufacturing and services PMI data are both due.

Pound to Aussie Dollar Update - 01/07/2014

The Pound weakened against the Australian Dollar after the Reserve Bank of Australia left interest rates on hold at the record low level of 0.5%.

The move was widely forecast by economists. The ‘Aussie’ also received support from the release of better-than-expected manufacturing data out of China.

Key Australian Dollar Exchange Rates Today - updated 02/07/2014

The Pound Sterling to Australian Dollar exchange rate is trading up +0.47% at 1.81538 GBP/AUD.
The Euro to Australian Dollar exchange rate is trading up +0.17% at 1.44395 EUR/AUD.
The US Dollar to Australian Dollar exchange rate is trading up +0.32% at 1.05707 USD/AUD.

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