Monthly Currency Update - GBP/AUD October 09

[Guest HIFX plc]

Hi All,

 

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

 

The month started as GBP/AUD crashed to a fresh 13-year low with the Aussie buoyed by a surprising jump in business investment last quarter, suggesting the Australian economy is growing faster than expected and underpinning bets for local rate hikes later this year. Data from the government also showed firms expected to spend heavily in 2009/10 as well, transforming the outlook for one of the hardest hit parts of the economy. Business investment had been expected to drag on growth with analysts forecasting a 5.0% fall in capital spending. Yet the numbers showed a 3.3% rise in the second quarter, and the AUD24.07 billion spent was the second highest reading on record. Crucially firms were also upbeat about their spending plans for the year the end of June 2010. The latest estimate was for spending of AUD90.6 billion in 2009/10, a major upgrade from the previous estimate of AUD78.5 billion.

 

Mid month the Aussie rallied to a 24-year high against a broadly weaker Sterling last as investors continued to go long on the back of rising confidence in riskier assets such as stocks and commodities. Reaction was relatively muted after Australia’s Central Bank voiced that it felt the economy was substantially stronger than expected at its policy meeting earlier this month, but decided there was enough uncertainty at home and abroad to argue against a hike for the time being. Minutes from the RBA’s (Reserve Bank of Australia) policy meeting on Tuesday showed its board had balanced the risk of fuelling inflation against prematurely choking off recovery when it decided to leave cash rates at a record low of 3.00%.

 

Last week the Australian Dollar remained the dominant force over Sterling as buoyed by further signs of economic recovery. New home sales surged by 11.4%m/m as first time buyers rushed to take advantage of First Home Owner Grants although it remains to be seen how the market holds up when the initiative is removed at the end of this month.

 

There was also encouraging signs from the labour market as the Skilled Vacancies Index rose 4.7% although the index is still running 49.3% lower than this time last year. Most importantly however, was a generally positive review of the Australian Banks in the semi-annual Financial Stability Review. Although bad loan provisions are expected to increase in the coming months, the banks are considered to be well capitalised and profitable, especially when compared to many similar institutions abroad.

 

Current Central Bank Rates:

 

Australia (Reserve Bank): 3.00% (Next meeting 6th October)

UK (Bank of England): 0.50% (Next meeting 8th October)

 

GBP/AUD Highs & Lows of September:

 

High: 1.9585

Low: 1.8070

 

A movement of: 8.38%

 

Difference this would make on £200k

 

High: 391,700 AUD

Low: 361,400 AUD

 

A difference of 30,300 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