British Pound to Australian Dollar Exchange Rate (GBP/AUD) Lower on Unchanged Interest Rates

Modified: Tuesday, 5 August 2014 09:58 BST - Written by David Woodsmith

STORY LINK British Pound to Australian Dollar Exchange Rate (GBP/AUD) Lower on Unchanged Interest Rates

GBP/AUD Update: The Pound to Australian Dollar (GBP/AUD) exchange rate softened on Tuesday after the South Pacific nation’s Central Bank chose to leave interest rates unchanged at the record low level of 2.5% and as RBA Governor Glenn Stevens gave little indication to further rate changes before the end of the year.

The Pound Sterling to Aus Dollar was little moved on Monday despite the release of better than forecast Construction data out of the UK and positive retail sales data out of Australia.

Market sentiment was under pressure from concerns over a possible financial crisis emerging out of Portugal and geopolitical concerns out of Libya, Ukraine and new concerns over a growing standoff between Armenia and Azerbaijan.

Since July the UK currency has fallen steadily against several major peers due to a run of disappointing economic data releases and as the Bank of England’s expected interest rate rise was factored into the currency’s value.

Sterling was unable to make much ground against the Australian Dollar and other major peers even as Markit Economics released a report which showed that the UK’s latest construction Purchasing Managers Index beat economist expectations.

According to the PMI, activity in the UK’s construction sector increased more than forecast by coming in at 62.4 in July. Economists had been expecting a reading of 62. Despite beating forecasts the figure indicated a slow in July from the previous month.

“July’s figures suggest the UK construction sector is enjoying its strongest cyclical upswing since the global financial crisis, while a new record rise in employment highlights that construction firms are increasingly confident about the sustainability of the upturn,” said Markit’s Senior economist Tim Moore.

The PMI report also showed that July witnessed the steepest increase in the residential building sector since November 2003. The rate of job creation was also the fastest since April 1997, when the PMI was first measured.


Sterling is unlikely to make gains against most of its peers this week as the markets predict that the Bank of England will maintain the UK’s interest rate at the record low level of 0.5% at its latest monetary policy decision meeting on August 7th. Policy makers are also expected to maintain the BoE’s quantitative easing programme at £375 billion.

The Australian Dollar also saw little in the way of movement despite the release of data which showed that retail sales in Australia increased by 0.6% in June, exceeding expectations for a gain of 0.4%. Retail sales for May meanwhile were revised to 0.3% from a previously forecast drop of 0.5%.

Economists had been expecting the data to show a further decline as concerns over the Australian governments tough federal budget and tax rises weighed.

‘Today’s data prints will give comfort to policy makers that the negative consumer reaction to the federal budget has not spilled over to adversely impact on spending decisions’ said an economist at the Commonwealth Bank of Australia.

Despite the positive data the ‘Aussie’ remained under pressure from China’s official non-manufacturing report which fell to a six-month low on Sunday. A negative report out of China often weighs upon the Aussie as the Asian nation is Australia’s largest trading partner.
Market sentiment came under pressure on Monday as tensions between Ukraine and Russia escalated after the Russian defence minister announced that the Russian military will be conducted exercises near to the Ukrainian border. The announcement comes as

Ukrainian forces prepare to besiege the pro-Russian separatist stronghold of Donetsk.

The ‘Aussie’ could edge higher against the Pound if Tuesday’s AIG Services Index comes in positively, also due for release is the latest balance of trade data.

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