The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate was trending within a limited range during Wednesday’s European session.
Despite the fact that there are several economic factors which would suggest Australian Dollar depreciation, the ‘Aussie’ remained resilient on Wednesday. This was due to speculation that the Reserve Bank of Australia (RBA) will not cut rates again in 2015 as the Sydney housing bubble expands.
The Pound, meanwhile, fluctuated versus its major peers during Wednesday’s European session. An initial depreciation, caused by less-than-ideal manufacturing growth, was countered by positive sentiment from the Bank of England (BoE) Financial Stability report.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is currently trending in the region of 0.4900.
The Australian Dollar maintained a position of relative strength during Wednesday’s European session despite significantly dampened risk sentiment amid geopolitical upheaval in Europe. Not even falling gold and iron ore prices and disappointing data out of China was enough to spark an ‘Aussie’ declination.
The Oceanic currency remained resilient thanks to speculation that the RBA will not cut the cash rate again in 2015. This is because the result of May’s cut has seen a massive 16% increase in Sydney housing prices. Following the rate cut ‘there was an instant buyer reaction across the Sydney and Melbourne housing markets where auction clearance rates surged back to levels not seen since 2009,’ said Tim Lawless, head of research at CoreLogic. ‘Sydney homes are selling in just 26 days and Melbourne homes are selling in 32 days’ even as rental yields decline. For the RBA to cut rates at this juncture would be significantly detrimental as it would further stoke a housing bubble looking set to burst spectacularly.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate dropped to a low of 0.4890 during Wednesday’s European session.
British manufacturing data printed disappointingly on Wednesday which caused the Pound to soften versus many of its peers. The Markit Manufacturing PMI came in at 51.4 in June; missing the median market forecast of a rise from 51.9 to 52.5.
Rob Dobson, Senior Economist at survey compilers Markit said: ‘The UK manufacturing sector had a disappointing second quarter overall. Growth trends in output and new orders were the weakest since the opening quarter of 2013, as a strong sterling exchange rate and subdued demand from mainland Europe offset the continued solidity of the domestic market. Export trade is also likely to remain a drag on the economy, given the uncertainty surrounding the Greek debt crisis. This makes it difficult to gauge fully any possible knock-on effects for the UK’s trade with the Euro area particularly in relation to impact from the Euro-Sterling exchange rate.’
However, the Sterling depreciation was relatively short-lived after the Bank of England published the Financial Stability report. Although Governor Mark Carney warned against the potential fallout on the global market from a Grexit, he stated that he was confident the UK was insured against the ramifications of such an event.
Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Forecast to Hold Steady ahead of Australian Trade balance
Given the absence of further domestic data publications to provoke volatility, the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is likely to hold steady for the remainder of Wednesday’s European session. Thursday’s Australasian session ought to see increased AUD/GBP volatility with Australian Trade Balance data due for publication.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate climbed to a high of 0.4927 during Wednesday’s European session.
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