Pound Sterling to Australian Dollar Exchange Rate Forecast to Strengthen as Iron Ore Price Dives

Modified: Thursday, 2 April 2015 16:34 BST - Written by Toni Johnson

STORY LINK Pound Sterling to Australian Dollar Exchange Rate Forecast to Strengthen as Iron Ore Price Dives

The Pound Sterling to Australian Dollar exchange rate ticked higher by around 0.24% during Thursday’s European session. Although slightly improved market sentiment saw increased demand for the high-yielding ‘Aussie’ (AUD), the South Pacific asset softened versus the majority of its most traded currency counterparts. The declination can be attributed to cooling iron ore prices as China continues to produce the commodity despite a lack of demand. The Pound, meanwhile, softened versus most of its major peers as a result of the hangover from a disappointing ONS report which showed British workforce productivity had dropped to World War Two levels.

The Pound Sterling to Australian Dollar exchange rate is currently trending in the region of 1.9533. With a complete absence of domestic data to provoke changes, the Pound softened on Thursday as a result of Wednesday’s report from the ONS. ‘The absence of productivity growth in the seven years since 2007 is unprecedented in the postwar period,’ the ONS said. Michael Saunders of Citi explained the reason behind the cool workforce productivity, saying: ‘Weakness in productivity reflects the combination of surprisingly strong job growth at a time when growth has been modest.’ Additional Sterling losses can be attributed to ongoing political uncertainty as we draw nearer to the general election. The strong possibility of a hung parliament has stymied investor confidence amid fears of a complete policy overhaul.

The Australian Dollar, meanwhile, softened versus nearly all of its most traded currency competitors after iron ore prices slid to a fresh 10-year low. The price drop has been linked to the opening of a Chinese iron ore mine based in Australia. ‘China’s government is looking at the long term and at securing future supply, rather than trying to obtain quick gains or make profit in the short term,’ said Caue Araujo, Sydney-based iron ore industry director at the research company AME Group.. ‘It’s more strategic than commercial at this stage.’ The Reserve Bank of Australia (RBA) is likely to be pleased with the ‘Aussie’ decline given that they have complained about overvaluation for some time.

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