Monthly Currency Update - GBP/AUD July 09.

[Guest HIFX plc]

Hi All,

 

Here is an update of what’s been happening in the Currency Markets throughout June with the Ozzie Dollar.

 

The summer has finally taken hold down in Windsor and it looks like we could be in for some record breaking temperatures over the coming weeks! (Fingers crossed). I’m sure many of you will be jetting off to even warmer climes over the coming weeks, so all the best to those that are.

 

GBP/AUD: The month started as Sterling, dented by concerns of political uncertainty and the Aussie buoyed after data showed Australia dodged a recession, fanning speculation the RBA is in no hurry to cut interest rates.

 

Australia’s economy expanded last quarter at its best trade performance in 48 years which helped offset a slump in business and housing investment, putting it among the few developed economies to have avoided recession. A government report on Wednesday showed GDP rose 0.4% in the three months to March from the previous quarter when it fell 0.6% (a revised figure). The Central Bank also skipped a chance to cut interest rates again at its June policy meeting on Tuesday, pointing to stabilisation in the global economy and pockets of improvement at home.

 

Australian employment fell by far less than expected in May, showing surprising resilience for a second straight month and leading investors to further pare back the chances of further monetary easing. Data showed only a net 1,700 jobs were lost last month, compared to an expected drop of 30,000. The release followed a rise of 25,400 in April and left employment down just 9,400 so far this year. However, not all of the report was so promising. Full-time employment fell by a larger 26,200 and these jobs tend to pay more and offer greater security. The unemployment rate also rose back to 5.7%, reversing a dip in April and equalling a five-year high.

 

Further falls in metal prices also weighed down on the Aussie. Australia is the world’s leading exporter of commodities such as iron ore and copper, so lower metal prices are bad news for the local Dollar. Australia’s Central Bank saw no “pressing need” to cut interest rates at its recent monthly policy meeting given signs of stabilisation at home and abroad, though it judged there was scope to ease further if necessary. Minutes of the 2nd June policy meeting reinforced expectations that the RBA was done cutting rates for some time now, helping the Aussie rebound against Sterling.

 

GBP/AUD closed last week broadly unchanged in spite of volatile trading, with the Aussie recovering from a two-month low as global investor risk appetite resurfaced and the currency cashed in on a softer Kiwi. The Australian Dollar initially came under pressure on Monday on the back of heightened speculation that local interest rates could fall rather than rise due to rising unemployment, tame inflationary pressures and the ensuing slack in the economy. However, we saw an encouraging 5.4% jump in new vehicle sales in May from the previous month, posting the biggest increase since early 2005. The strength suggested that fiscal pump priming and low interest rates continued to support demand last month and could point to another healthy reading for retail sales.

 

Current Central Bank Rates:

 

Australia (Reserve Bank): 3.00% (Next Meeting 7th July)

UK (Bank of England): 0.50% (Next Meeting 9th July)

 

Highs & Lows of June:

 

High: 2.0878 – on the 22/06/09

Low: 1.9871 – on the 05/06/09

 

Difference on £200k

 

High: 417,560 AUD

Low: 397,420 AUD

 

A difference of 20,140 AUD.

 

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.

Regards

 

 

 

Jon Sermon

HiFX