Brexit effect on Aussie Dollar
05 July 2016 by News DeskFor anyone watching movement of the Aussie Dollar here’s a guide to recent Pound-Dollar movements, courtesy of currency specialists TorFX.com
On July 1st the Pound to Aussie Dollar exchange rate succumbed to a new two-year low but Sterling managed to claw back around 60 pips when markets reopened for this week’s session fuelled by fears over political uncertainty Down Under.
The Aussie Dollar suffered as a very close vote in the Australian general election stoked concerns of a hung parliament.
New Zealand Dollar – GBP/NZD tumbled almost two cents on Friday to strike a new three-year low as BoE interest rate speculation pushed UK bond yields to record lows and dissuaded traders from buying the Pound.
Sterling gains against Aussie Dollar
June 28 – Sterling made moderate gains against the Australian Dollar on Tuesday marking the first actual gains seen by the Pound against its peers since the UK Brexit vote.
The Aussie Dollar has been mixed of late, although a sudden bout of weakness for the US Dollar meant losses have been tempered in some pairings.
The GBP/AUD exchange rate remains in the region of a multi-year low, having dropped to 1.7981 from 1.9707.
While the Pound has recovered slightly after a dismal immediate post-Brexit performance, the currency remains in the region of multi-year lows against a number of its most-traded counterparts.
Aussie Dollar on the Up
The Australian Dollar has found itself in relatively high demand today, which comes in sharp contrast to previous days when interest in AUD was comparatively more muted.
An additional source of support for the Australian currency has been the recent ANZ Roy Morgan weekly consumer confidence index for June; although a dip was recorded from 118.8 to 116.8, the latter figure remains close to a monthly high.
For the remainder of the current week, Pound Sterling/Australian Dollar exchange rate movement is more likely to occur as a result of the latest ‘Brexit’ news rather than in response to tomorrow’s UK lending and credit data, Thursday’s UK Gfk confidence figure and GDP results and Friday’s speech from Bank of England (BoE) policymaker Andy Haldane.
Australia is expecting the HIA new home sales result for May, while the week will close for Australia with the AIG manufacturing index for June.
Looking ahead, home sales are forecast to jump while manufacturing also has an improvement in store.
Aussie Dollar – GBP/AUD Hits 2-Week High
June 20th – Demand for the risk-sensitive ‘Aussie’ has been particularly volatile in recent days, as worries over the outcome of the UK’s EU membership referendum have intensified sharply.
With opinion polls showing the ‘Leave’ campaign in front investors were inclined to adopt a more risk-averse attitude, although this anxiety was of greater influence on the Pound.
The GBP/AUD exchange rate subsequently entered a slump, falling to 1.9087 before consolidation trading drove the pairing back up.
Optimism in the outlook of the Australian economy was not particularly enhanced by the latest NAB Business Confidence and Westpac Consumer Confidence surveys. Both measures showed a weakening in domestic sentiment, suggesting that negative headwinds could be having a more detrimental impact on economic conditions.
Lower business confidence in particular is likely to drag on the local economy, with investment seeming less likely and growth expected to be stunted as a result.
Brexit-based volatility eased somewhat ahead of the weekend. With no domestic data released and silence from the ‘Remain’ and ‘Leave’ camps the Pound regained some of its lost ground.
This upward momentum was maintained at the start of the new week, with Sterling on track for its biggest single-day gains of the decade thanks to the results of the latest opinion polls. As a result the GBP/AUD exchange rate reached a fortnightly best of 1.9631 on Monday morning.
Confidence in the Australian Dollar could recover on Tuesday if the June meeting minutes of the Reserve Bank of Australia (RBA) prove less dovish.
If the central bank is shown to be more reluctant to consider cutting interest rates again in the near future then the ‘Aussie’ is likely to rally, especially given the decreasing likelihood of an imminent Fed rate hike.
However, if policymakers continue to express uncertainty over the outlook of the domestic economy then the GBP/AUD exchange rate could extend its recent gains further.
Contact currency specialists TorFX: www.torfx.com
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