A slew of poor data for the UK has seen Pound Sterling crash amid speculation of lacklustre economic performance, leaving the Australian Dollar free to charge up during an otherwise unremarkable day of ‘Aussie’ trading.
The good fortune of the Australian Dollar today is more due to the weakness in Pound Sterling than domestic strength, especially as the country’s stock markets continue to be rocked by Chinese uncertainty. So far this year investor panic in Shanghai has knocked the Australian S&P/ASX 200 index down -7.4%, resulting in investor losses of $105 billion. The only data available recently has shown a -0.1% fall in Job Advertisements, a -2.2 fall in the Consumer Confidence Index to 114.1 and a slight rise in Credit Card Balances and Consumer Credit.
As well as weakness in the UK economy, the Australian Dollar has also been strengthened by caution in the US, as more than one member of the Federal Reserve tries to control expectations surrounding the next hike in US interest rates. Recent comments by Robert Kaplan and Dennis Lockhart have suggested a more dovish outlook on monetary policy than that held by the Federal Reserve before Christmas.
In a day in which the Australian Dollar has been performing fairly well, but without notable gains against any other currency, the AUD/GBP exchange rate stands out for its 0.8% rise, trading around 0.4842.
The release of worse-than-expected Retail Sales, Industrial Production and Manufacturing Production figures today has caused serious concern over how well the UK economy will have performed when data for Q4 2015 becomes available. Retail Sales grew just 0.1% year-on-year (YoY) over the Christmas period, Industrial Production growth unexpectedly dropped from 1.7% to 0.9% in November, while Manufacturing Production declined -1.2%. Economists and investors had been hoping that the UK economy would end 2015 on a high, but today’s data suggests that a slowdown is more likely.
The speculation has caused widespread Pound losses, with GBP trending down -1.0% against the Australian Dollar (AUD) and plunging even further against currencies including the US Dollar (USD), the Norwegian Krone (NOK) and the Turkish Lira (TRY). The biggest Pound loss has been a -2.6% slide against the South African Rand (ZAR).
The GBP/AUD exchange rate is currently trading between 2.0515 and 2.0922.
Thursday sees the release of Australian labour market data and the Bank of England’s (BoE) next decision on interest rates. Australian Employment Change figures are expected to show a -10k drop in the number of people employed, which would push unemployment up to 5.9%. The BoE are unlikely to change monetary policy, so the focus will be on the minutes of the meeting, rather than the result of it.
The AUD/GBP exchange rate is currently trading between 0.4776 and 0.4872.
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