The Australian Dollar to Pound exchange rate recovered from its worst levels on Thursday afternoon, but struggled to advance much higher as risk-sentiment remained low. During Friday’s European session, AUD/GBP was on track to lose around one cent in value throughout the week, and trended flatly in the region of 0.5685.
The Australian Dollar has lacked any kind of real demand in the last week, after Federal Reserve official comments during and since the August symposium at Jackson Hole left markets entirely focused on the US economy and chances of a Fed rate hike in 2016.
As a result, risk-correlated currencies like the ‘Aussie’ Dollar have struggled to hold their ground against other major rivals. The Pound’s bullishness this week has meant that AUD/GBP has easily given up value.
While sentiment towards the ‘Aussie’ remained decent due to solid Chinese trade data and the generally high performance of the currency this year, the market’s risk-off focus has muted demand.
Prices of iron ore, Australia’s most lucrative commodity, also began to slip further this week, falling below the key level of US$60 per tonne and continuing to gradually trend downward throughout the week.
However, the Australian Dollar and other commodity-correlated currencies benefitted during Friday’s American session, as August’s US Non-Farm Payroll report disappointed investors.
Sterling has been able to enjoy a mostly solid advance over the last week, thanks to the most recent slew of better-than-expected UK ecostats, continuing a trend seemingly indicating that the British economy had rebounded slightly in August.
The biggest movement for the currency was during Thursday’s European session upon the publication of Britain’s August Manufacturing PMI from Markit.
Manufacturing was expected to continue to contract in August after July’s dire score, but instead printed a surprising growth of 53.3. The highest score in 10 months cheered UK markets.
While Sterling struggled to hold its best Thursday levels as investors readjusted from its surge, the currency was kept afloat on Friday thanks to a smaller-than-expected contraction in UK Construction.
Markit’s August Construction PMI was expected to soften slightly from 45.9 to 46.5, but instead made a more considerable recovery to 49.2. However, this figure was unable to boost Sterling to its best weekly levels as markets awaited Monday’s key Services PMI.
Sterling also benefitted on Friday from a weak US Dollar, but as the ‘Aussie’ and Pound both strengthened the AUD/GBP exchange rate fluctuated relatively flatly.
The Australian Dollar will likely continue to react to Friday’s US Non-Farm Payroll report when markets reopen on Monday, with little in the way of influential Australian data until Tuesday’s Reserve Bank of Australia (RBA) meeting.
The RBA is not expected to make any changes to Australia’s overnight rates when it meets on Tuesday – in what will be RBA Governor Glenn Stevens’ last meeting as Governor before his term ends on the 17th.
Iron ore prices may drive the Australian Dollar if they begin to make more sudden movements in one way or the other, with analysts predicting that the commodity’s current sturdiness may not last.
A report published by Business Insider Australia on Friday predicted that recent stability in the commodity’s prices may already be coming to an end going forward;
‘…Chinese iron ore futures … flew higher in overnight trade.
The most actively traded January 2017 contract on the Dalian Commodities Exchange finished at 424.5 yuan, up a hefty 2.54% for the session. The reversal followed a plunge of over 11% over the six prior trading sessions.’
As for UK investors, the most influential upcoming dataset will be Monday’s August Services PMIs from Markit. As services are Britain’s largest economic sector, this figure could inspire bullishness in the Pound if the PMI prints solid growth following July’s contraction of 47.4.
At the time of writing, the Australian Dollar to Pound exchange rate trended in the region of 0.5685, while the Pound to Australian Dollar exchange rate traded at around 1.7585.
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