Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Advances as Aussie Pulled Lower by Commodity Prices

Modified: Monday, 1 December 2014 23:03 BST - Written by Ben Hughes

STORY LINK Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Advances as Aussie Pulled Lower by Commodity Prices

The Pound gained against the Australian Dollar after the ‘Aussie’ slid against a host of other majors due to global developments.

The Australian Dollar dipped to a four-year low against currencies such as the US Dollar as a result of weak Chinese data and falling commodity prices.

Currency strategist Robert Rennie stated: ‘In major commodity markets—whether it’s energy. Industrial metals or precious metals—there was a very strong consistent theme through last week and it’s obviously continuing.’ It is hoped that the recent downtrend in the Australian Dollar will support domestic growth, and one aspect of the Australian economy that improved in November was the manufacturing sector. AiG recorded a rise in the Performance of Manufacturing Index in November from 49.4 to 50.1, the first growth since July.

Aus Dollar Rate Weakens on Gold Referendum

However, the Aus Dollar exchange rate was subject to softening as a result of the recent gold referendum in Switzerland. The event saw citizens vote on whether to force the Swiss National Bank (SNB) to hold 20% of its reserves in gold with the inability to sell bullion. The ‘No’ result saw the price of gold fall and pressured commodity currencies such as the Australian Dollar lower. Westpac spokesperson Sean Callow commented: ‘The Aussie gold got sold off on the expectations that gold is going to get hammered.’

Pound Sterling Sees Boost From PMI

Meanwhile, the UK published a favourable Manufacturing Purchasing Managers Index (PMI) on Monday, which bolstered the British currency. Markit recorded a rise from 53.3 to 53.5 in November, despite expectations of a fall to 53.0. The 50.0 benchmark divides expansion (above 50.0) from contraction (below 50.0). Meanwhile, UK Consumer Credit demand increased by 6.4% on the year in October. Economists’ had forecast a rise from 0.9B to 1.0B; however, the actual figure reached a favourable 1.1B in October. Economists’ believe the increase was a result of more competition on the high street.

In addition, lower UK borrowing costs are also expected to have contributed to the increase. Economist Howard Archer commented: ‘It also may well be that a significant amount of people are borrowing more due to the squeeze on their purchasing power coming from extended low earnings growth.’

Australian Dollar Exchange Rate Forecast

The Australian Dollar could feel the effects of the Weekly Roy Morgan Consumer Confidence Index released later in Monday’s session. However, Tuesday could be a more interesting day for the ‘Aussie’ when the Reserve Bank of Australia (RBA) announces its latest rate decision. Although the official cash rate is expected to remain at 2.50%, interest rate announcements are a development that can cause significant movement. In addition, the release of Australian Building Approvals and Current Account Balance figures could also impact the Australian commodity currency on Tuesday.

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