The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate remained volatile last week drifting between a low of 0.50627 and a high of 0.51754. At close of business Friday the AUD/GBP exchange rate was of 0.5134.
Both currencies threatened to build momentum at different stages of the week. The Pound started the week on a high as investors moved back into the currency as uncertainty surrounding the election was left behind. A favourable conservative government combined with above expectation manufacturing data acted to drive gains early in the week. On Wednesday the UK released employment data signalling that unemployment levels had reached a seven year low; falling to 5.5% from 5.6% in March.
Disappointing Chinese data played a part in driving down the local currency. Last week’s Industrial and Manufacturing data released out of China was below expectation signalling a slowdown in the economy of Australia’s largest trading partner. The concern that Australia would lose its AAA credit rating also added to the uncertainty putting downward pressure on the ‘Aussie’ in the early stages of the week.
The ‘Aussie’ made some gains against the Pound mid way through the week when Bank of England Governor (BoE) Governor Mark Carney revised down the forecast for the UK. The BoE announced that it believes the UK’s GDP will reach 2.4% in 2015 rather than the 2.9% forecast just three months ago. Many investors had predicted a hawkish BoE given that the UK’s economic recovery had been fairly resilient. Markets had expected Carney to indicate the timing of the next interest rate hike however this was not the case; bringing the exchange rate back in check slightly.
The Pound went on to finish the week on a high as investors anticipate what may lie ahead when the Reserve Bank of Australia (RBA) release the minutes from their March meeting on Tuesday. It is expected that while a hawkish tone may generate AUD strength, a dovish tone or mention of further interest rate cuts in 2015 may see Australian Dollar immediately weaken following the announcement.
The RBA has made no secret of the fact they believe the Australian Dollar to be presently overvalued; and its intention to drive down the local currency to the target band of 0.70 to 0.75 US cents to stimulate exports. However, despite two cuts to the official cash rate this year and current record low interest rates the Aussie has continued to make steady gains against the ‘Greenback’ in recent weeks. It is expected that this may be keenly featured in Tuesday’s release thus raising an immediate concern for investors holding Australian Dollars.
With no real high tier local or International data due for release today we can expect a fairly stable day. Instead all eyes will be on Tuesday for high tier data releases. Tomorrow New Zealand and the UK are due to announce their quarterly inflation figures, the US will release Building Permits and at 11:30am locally the RBA is set to release the minutes from its March Monetary Policy Meeting.
At 8:30am this morning the AUD to GBP exchange rate was trending in the range of 0.5105.