The UK Pound has been the focus for the past week, with a huge sell-off of the GBP since Thursday with consecutive days of unanticipated announcements that have caused investors to line up to sell off their pounds, so much so that there was a substantial gap between closing and opening figures for the GBP after the weekend, a very rare occurrence for the FX Market.
Monday saw a one percent drop in the GBP against the AUD with the political and currency instability caused by the referendum on the Scottish Independence. The final vote will take place on the 18th September and until this time we are likely to see considerable volatility in the Pound Sterling as investors take the gamble on this substantial game changer. Economists are predicting that if the vote is pro independence we could see the GBP fall to lows not seen since early 2013.
Last night was no exception as focus continued to stay on the UK, with a large volume of economic data out of the country with mixed results. GBP Manufacturing Production came in with a positive result of 2.2% against the previous period at 1.9%.GBP Trade Balance was a negative result at -10.2B a substantial change from the previous month result of -2459. GBP NIESR Gross Domestic Product, which is an estimate of UK GDP that comes out one month prior to the official release was calculated to be at 0.6%, this was better than the previous result of 0.5% and is considered a highly respected projection of economic activity for the country.
Bank of England Governor Mark Carney spoke in Liverpool at the Trade Union Congress to discuss the UK labour market. Stating that the BoE manage ‘monetary policy to achieve price stability: low, stable and predictable inflation’… ‘putting in place the foundations for sustainable job creation and income growth.’ Carney made references to the labour market in other major economies including the US and Euro-Zone and claiming that the UK labour market has outperformed these countries. In reference to interest rates Carney stated that ‘Moreover, the precise timing of the first rate rise is less important than our expectation that, when rates do begin to rise, those increases are likely to be gradual and limited’.
The GBP made some ground back on the AUD last night gaining back 0.85% of the losses from earlier this week currently trading at 0.5713 at 8:15 AEST this morning.