The Australian Dollar (AUD) to Pound Sterling (GBP) exchange rate continued to suffer last week falling to a new 7 year low of .47095 as the Pound’s momentum shows no sign of slowing down. The AUD has struggled of late against a basket of currencies due to weakening commodities prices and concerns over Chinese growth. Greece’s failure to come to an agreement with its creditors is also believed to be a contributing factor, as nervous investors move away from the AUD into safe haven currencies such as the Sterling and US Dollar.
Lending further support to the surging GBP, Bank of England Governor Mark Carney suggested in an address Thursday that the time to start thinking seriously about raising rates may come “around the turn of this year”. In his address Carney indicated that if the current trend of positive data continued in the UK that we could see interest rates raised sooner than expected.
Australian Dollar (AUD) to US Dollar (USD) trading at six year lows as the USD Surges in Anticipation of a September Rate Hike
The Aussie dollar, meanwhile, did make some small gains against the US Dollar mid-week defying the run of play following the release of better than expected Chinese data. The gain was however short lived as the Greenback continued its advance later in the week as markets repositioned themselves in anticipation of a Federal Reserve rate hike.
Although there were no clues on timing from Fed Reserve President Yellen, San Francisco Fed President John Williams; a current FOMC voter whose views are often regarded as quite closely aligned with Yellen’s – has just crossed the wires saying that September would be a ‘very plausible’ time to start raising interest rates. Other positive data released out of the US last week added further support to a USD rate hike; New York state manufacturing survey at 3.86 up from -1.98 (3.0 expected), core PPI +0.3% (0.1% expected and previous) and industrial production up by 0.3%.
Focus today will turn to the minutes from the latest RBA monetary policy meeting due for release tomorrow at 2pm to detail the Reserve Bank’s perception of local economic conditions which influenced their decision to keep interest rates on hold earlier in the month. This will be followed by the release of June quarter CPI on Wednesday. It is expected to reflect a picture of generally subdued price pressures, though the reversal of recent declines in petrol prices will see a high headline inflation rate for Q2 that’s expected to increase 0.8 q/q, taking annual inflation to 1.7%. Underlying inflation is forecast at 0.6% q/q, with an annual rate of 2.3%.
From International markets this week, the US will release its Existing Home Sales for June on Wednesday, followed by weekly jobless claims in July payrolls week, the Leading Index and the Kansas City Fed index also on Thursday. New Home sales for June are being released on Friday along with the Markit version of the Manufacturing PMI. The main interest for European data marketwise will be Friday’s preliminary Markit PMIs for Germany and the EC with unchanged results expected for July.
In the UK, the Bank of England (BoE) Minutes, due Wednesday, will hold the market’s attention in the wake of Governor Mark Carney’s comments this week. The key data point for the UK will be the June retail sales report, due Thursday.