Worse-than-Forecast Trade Balance Data Pushes Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Upwards

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Fifty Pound Sterling (GBP)

The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate strengthened strongly on Thursday as the UK currency was weakened by worse-than-forecast trade balance data and the decision by the Bank of England to leave interest rates unchanged at the record low level of 0.5%.

The Australian Dollar to Pound Sterling reached a session high of 0.5223

The ‘Aussie’ got the session off to a strong start as data showed that the Australian construction sector expanded more than forecast in March. According to the Australian Industry Group/ Housing Industry Association Performance of Construction Index, activity in the sector rose by 6.2 points to a reading of 50.1. The figure marks the first time since October 2014 that activity rose above the 50 mark, which divides contraction from expansion.

A rise in new orders in house building, which returned to growth in March (up 8.2 points to 50.6 points) after declining over the previous four months, indicated that growth in the house building sector is likely to be sustained in coming months.

‘Renewed strength in house and apartment building drove the Australian construction industry back into growth territory in March. The lift in these residential construction sub-sectors from already healthy levels more than compensated for a steeper fall in engineering construction, in line with the retreat from investment in mining-related projects and further weakness in commercial construction,’ said AIG director Peter Burn.

With the Australian financial market closed for the Anzac national holiday the currency was also continuing to be buoyed by Tuesday’s decision by the Reserve Bank of Australia (RBA) to leave interest rates on hold.

Against the US Dollar, the ‘Aussie’ is now expected to continue to trade at a steady pace of between 75 and 78 US cents.

‘We’re at a stage where the market seems fairly reasonably priced for the information we have, so unless we get new information, there’s probably not going to be a lot of volatility. The market is in wait-and-see mode,’ said Jon Linton from Nomura.

The Pound Sterling meanwhile weakened following the release of data, which showed that the UK’s trade deficit widened to £10.34 billion in February from £9.17 billion in January, whose figure was revised from a previously estimated deficit of £8.41 billion. Economists had expected the trade deficit to hit £9.00 billion in February.

For the three months to the end of February, exports to the European Union were at the lowest level since records began in 1998. The EU goods deficit reached a record high of £21.1bn. Exports to the USA were also shown to have declined.

Sterling could regain some ground on Friday if the latest UK Industrial and manufacturing production data comes in better than forecast. The only release due for the ‘Aussie’ is Home loans data.

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