Aussie Dollar exchange rate 6 july
06 July 2016 by News DeskThe latest exchange rate update from TorFX highlights continuing market volatility since UK voted to leave the EU.
The Pound to Australian Dollar exchange rate slid 150 pips yesterday to strike The Reserve Bank of Australia left interest rates on hold at 1.75% yesterday morning.
But traders interpreted a speech by Governor Glenn Stevens to suggest that borrowing costs could be slashed at the beginning of August. This could weigh on the ‘Aussie’ against the majors.
New Zealand Dollar – GBP/NZD exchange rate suffered losses of almost two cents yesterday as the Pound fell to a new three-year low against the New Zealand Dollar. The commodity-correlated ‘Kiwi’ was lucky to appreciate seeing as the value of dairy produce, its most lucrative export, fell at the latest auction.
The exchange rate was hit across many currencies. The Pound tanked across the board as the economic impacts of UK Brexit vote have started to be felt.
Three major commercial property funds (Standard Life, Aviva and M&G) have suspended withdrawals in response to overwhelming demand from jittery investors. These funds, which account for around £10 billion of investments, are important because 75% of small businesses use commercial property as collateral for loans.
If these commercial property funds continue to shed money it could conceivably set off a cycle of lower property prices in the sector leading to tighter credit conditions for SMEs, who may then react by reducing business investment and hiring.
Additionally, data compiled by the Bank of England suggests that for each 10% fall in commercial property prices there is a 1% drop in general economic investment. Consequences for the exchange rate are potentially vast.
In order to insulate the risk of financial turbulence spreading, the BoE announced it was relaxing capital buffer requirements for UK banks.
The decision means that commercial banks now have an additional £150 billion to lend to the real economy. Despite the measures and the hope of further stimulus from the central bank the Pound succumbed to a series of multi-year lows against the majors during yesterday’s session.
Currency Exchange Rate 6 July
Euro – The Pound to Euro exchange rate tumbled by almost two cents yesterday to strike a 33-month low as British sentiment deteriorated further.
UK services PMI data showed the dominant sector witnessed its joint-weakest performance for 38 months in June.
Firms reported declines in new orders as clients held back on signing off work ahead of the referendum, which suggests the sector is liable to suffer more losses over the coming months as the impact of the vote continues to spread.
The panic caused by major commercial property funds suspending withdrawals is putting Sterling under intense pressure. Forex traders are worried that more funds will follow suit, which could potentially prompt foreign investors to pull out of the UK property market. This would have the consequence of devaluing the Pound further over the coming days and weeks.
US Dollar – The Pound to US Dollar exchange rate depreciated by over two cents yesterday to strike its lowest level since 1985.
Drones of investors pulled out of the Pound due to fears that the economy could suffer severe economic shocks following the vote to leave the European Union. The BoE announced measures to support financial stability yesterday but it was not enough to stop major property funds from suspending trading and markets are concerned that the situation could spiral.
The BoE is expected to cut interest rates and boost its quantitative easing scheme at the start of August, possibly as early as next week, and although this should help stimulate the British economy it will probably weigh on demand for Sterling as yields drop to fresh record lows.
Canadian Dollar – Sterling slumped by around two cents yesterday to reach a fresh two-and-a-half-year low exchange rate against the Canadian Dollar.
The commodity-sensitive ‘Loonie’ lost out to some of the other major currencies as global growth fears were dealt a blow by the turmoil in the UK commercial property sector. However, the ‘Loonie’ came out on top versus the Pound, which, understandably, suffered the bulk of the ‘Brexit’-related losses.
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