GBP/AUD Market Update - May 09

[Guest HIFX plc]

Hi All,

 

As promised he is an update of what's been happening throughout the Currency Markets over the last month.

 

GBP/AUD dipped to a fresh 12-year low at the start of May, with the Aussie encouraged by tentative signs the world economy may be on the road to recovery, outweighing some poor domestic economic data. Figures from the Reserve Bank of Australia also showed total credit rose a meagre 0.1% in March, well below forecast, pulled down mainly by sluggish business credit that declined by 0.6% from February. That mirrored a private sector survey which showed businesses were struggling with the worst conditions in almost 17 years last quarter. A collapse in forward orders and exports left them even more pessimistic about the outlook for the coming months. The survey of more than 900 firms from the National Australia Bank found business expectations for the next twelve months fell to their lowest level since the survey began in 1988.

 

The Aussie retreated from a seven-year high against Sterling mid month as mixed global economic data cast doubt on the strength of a recovery in the world economy, hurting demand for riskier currencies. The local Dollar remained under pressure after Australia’s government unveiled its largest deficit on record and forecast a decade of debt in its budget, designed to nurse the economy through recession and keep open the option of an early election. Treasurer Wayne Swan said the global downturn forced the government to write down revenues by AUD23 billion in the current year, its biggest hit to income since the Great Depression, and by AUD210 billion over four years. The budget forecast the economy to shrink 0.5% in 2009/10 before bouncing back to 2.25%growth in 2010/11, with unemployment to rise 8.25% by June 2010 from 5.4% now.

 

Consumer confidence fell in May, reversing some of April’s surge while consumers were also notably unhappy with the Central Bank’s decision to keep interest rates unchanged at 3.00% in May. The survey of 1,200 people by the Westpac-Melbourne Institute showed its index of consumer sentiment fell 4.3% to 88.8 between April and May, its second biggest fall following the release of a budget in the last ten years. Prospects of a weakening jobs market led to a rather moderate rise in wage costs for the first quarter. Government data on Wednesday showed first-quarter wage costs rose 0.8% in the first quarter, in line with expectations but slowing from a revised 1.3% rise in Q4.

 

GBP/AUD edged lower last week with the AUD boosted mostly by broadly higher commodity prices and growing investor risk appetite. Nevertheless, the Aussie came under fire mid-week after Australian business investment fell faster than expected last quarter, with companies slashing spending plans in the face of the economic crisis, adding to the view that the country is in its first recession since 1991. The slump in business expenditure was driven by the largest quarterly fall in plant and equipment spending since the survey began in 1987. This will feed into first quarter gross domestic product, which is likely to show a drop in the value of all goods and services produced. The government reported capital spending fell 8.9% in the first three months of 2009 to AUD22.96 billion and reversed the previous quarter’s surprise 7.3% rise.

 

Central bank rates

 

OZ: 3.00% (Next meeting 7th July)

US: 0.25% (Next meeting 24th June)

ECB: 1.00% (Next meeting 4th June)

 

High & Low of the month

 

High: 2.0599 (on the 27/05/09)

Low: 1.9687 (on the 08/05/09)

 

Difference in cost on £200k:

 

High: 411,980 AUD

Low: 393,740 AUD

 

A difference of 18,240 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.

 

Best Regards,

 

 

 

 

Jon Sermon

HiFX

[Guest covfan71]

I hope this exchange rate picks up again before we come out next year.

[Anne B]

The pound is sliding today because of all the political turmoil.

 

Time for the politicians to make some decisions - the UK is looking a bit like a rudderless ship with no-one at the helm!

 

Still plenty of time for it to improve before we move over. Fingers crossed !!!