AUD/GBP Weakens, Australian Dollar (AUD) Falls Against the Majors

Yesterday the Australian Dollar (AUD) lost close to half a percent against the majors during the day’s trading session. This loss extended throughout the night and the AUD lost over a full percent against the US Dollar (USD), Pound Sterling (GBP) and Euro (EUR).

In a week that is absent of high tier domestic economic data being released out of Australia, the Australian Dollar has still experienced a large degree of volatility. The AUD had a minor rally in the lead up to the previous weekend and it continued this trend at the opening of this week’s trading. The AUD has since lost its’ momentum, experiencing significant losses overnight and is currently trending downward in value against the major currencies.

Australian Dollar to US Dollar (AUD/USD) Exchange Loses over a Full Percent
The AUD to USD exchange rate has fallen by over one percent and is currently trending back down.

Overnight the US Federal Reserve released the Minutes from the Federal Open Market Committee (FOMC) Meeting on the 28th-29th October. The underlying tone of the Minutes was that the Fed interest rates will remain on hold for a ‘considerabletime’; however, private economists forecast an interest rate rise by the Fed in mid-2015. The Fed also made reference to the recent rise in strength of the USD and the fact that it sees a positive outlook for the US economy.

This caused the AUD to USD exchange rate to fall as the positive sentiment grew for the US economy, following the release of the FOMC Minutes.

Tonight the US will report on their current inflation levels. Currently the annualised Consumer Price Index (CPI) is 1.7%. The forecast for this economic indicator is a minor reduction, with a printed figure of 1.6% expected. Inflation can be a major influence on a currency pairing if the result is unexpected. A lower than expected US inflation figure is likely to drive the AUD to USD exchange rate up, whilst a higher than expected figure should cause strength to the ‘Greenback’, pushing the AUD to USD exchange rate down.

The US economy will also release employment data tonight in the form of Continuing Claims and Initial Jobless Claims, as well as reporting on Manufacturing PMI and Existing Home Sales.

Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Falls Heavily After Hitting 2 Month High
The AUD to GBP exchange rate has fallen by over one and half percent after it hit a 2 month high on Monday.

The Bank of England (BoE) Minutes were released out of the UK yesterday evening. Mark Carney, Head of the BoE communicated that inflationary pressures may build in the future, which would eliminate the need to keep interest rates lower for longer. It was the first solid positive movement the GBP has experienced this week.

Tonight the UK economy will release their Retail Sales figure for the month of October. Economists forecast an increase to the previous months figure, from 3.1% to 4.2%. The AUD to GBP exchange rate broke out of its recent range last week and it appeared as though the AUD was going to continue to make good gains against the GBP. In a single evening, the AUD/GBP returned to the level it was at over a week ago and the trend has reversed.

Australian Dollar to Euro (AUD/EUR) Exchange Rate Falls
The AUD to EUR exchange rate is currently trending back in favour of the Euro.

Increasing expectation of a firm stimulus package for the Euro Zone has brought about positivity for the Euro currency. German Economic Sentiment in the form of the ZEW Survey released earlier this week indicated a much more positive outlook and appreciated the value of the Euro, pushing the AUD to EUR back down after touching a 2 month high.

Tonight the Euro-Zone Purchasing Managers’ Index (PMI) for the Services and Manufacturing industry will be released. The forecast for this economic indicator is for a minor improvement to the previous months’ expansion. Consumer Confidence will also be released tonight out of the Euro-Zone and although a negative figure is expected, it will be interesting to see if the actual result exceeds the forecasts.

Terry Finn