Positive news regarding the transforming nature of the Australian economy was outweighed by a strong US Dollar (USD) on Tuesday, keeping AUD/GBP weak. Pound Sterling was soft overall, as ‘Brexit’ rows continued to dominate sentiment for the currency, but it was the Australian Dollar which proved to be the weaker currency.
The ‘Aussie’ was pushed into a bearish decline on Tuesday, despite positive news regarding the antipodean country’s transition away from mining and the supportive nature of Chinese consumer demand. The Australian Dollar has been kept weak by anticipation of positive US consumer confidence figures strengthening the ‘Buck’.
The decline is in contrast to the positive economic news which has shown strong progress in the transition of the Chinese and Australian economies. China is continuing to see rapid growth in consumption and consumer demand, while an emerging preference for food, health products and services is helping Australia to adapt away from its previous overreliance on mining.
According to HSBC’s Chief Australia Economist Paul Bloxham, ‘Australian exports provide clear signs that middle-class incomes are continuing to gain and preferences are shifting in China toward services and higher-quality food products. The time-frame for China’s transition is large, a decade or more, and it won’t be easy. But the fact it is already underway is positive.’
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is currently trending in the region of 0.5277.
Britain’s European Union exit referendum continues to weigh heavily on trader minds, with a new survey showing that it has contributed to a fall in financial sector confidence. Along with the global economic slowdown and the current turbulent state of the markets, the ‘Brexit’ debate has seen sentiment fall at the fastest pace in five years. With a manufacturing sector still struggling, the news that financial services – which account for 10% of UK Gross Domestic Product – are pessimistic about the future has further heightened fears of an economic slowdown during the coming year.
However, Pound Sterling is receiving some support from the news that the Bank of England (BoE) is due to announce measures to curb buy-to-let (BTL) lending in order to prevent a property crash. The BTL market has been of concern to many economists and investors for several months now, with the BoE worried by the relaxing of lending standards and the vulnerability of the market to even the smallest increase in interest rates.
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trading between 1.8809 and 1.8975.
There is no data due for either Australia or the UK today, so movement in the currency pair is likely to be dictated by overseas developments. Key among those today will be the publication of the US Consumer Confidence index, which is expected to show a mild uptick in sentiment. A disappointing result could help the Australian Dollar to recover, while a figure in line with, or better than, estimates could work in the Pound’s favour.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is currently trending between 0.5266 and 0.5314
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