GBP/AUD Falls after Solid Aussie and Chinese Data

GBP/AUD Drops Back Below 1.81

It’s been a fairly choppy few days’ trading for the sterling/aussie cross, with the pair trading above 1.82 again briefly, but now firmly on its way back towards 1.80. Solid Australian employment growth and better than expected Chinese trade data have strengthened the Aussie and brought the rate back down towards the 1.80 level. The graph below shows GBP/AUD movement over the last seven days.

GBP/AUD

Figures released on Thursday morning showed Australia’s unemployment rate remained steady for April, with employment increasing more than expected, with analysts now suggesting joblessness may have peaked. The number of people in employment rose by 14,200, well above the expected rise of 9,000. The figures released by the Australian Bureau of Statistics on Thursday morning gave the AUD a boost, highlighted by the sharp drop on the graph above. CommSec economist Savanth Sebastian said of the figures:

“Job growth has been solid over the past couple of months,”. “In fact a total of 106,000 new jobs have been created since the start of 2014–marking the best start to a calendar year in six years. There is no question that the economy has lifted and it is pretty clear that the transition in activity from mining to housing construction has been a case of so far so good and more importantly housing construction is supporting the recent strength in employment.”

The better Aussie data has fuelled speculation that the Reserve Bank will be looking to raise interest rates in the alst quarter of this year. The dollar’s demise in 2013 was a result of repeated interest rate cuts. As a result, GBP/AUD rose from 1.44 to 1.92 over the course of the year. The dollar has strengthened this year as central bank rhetoric has become more bullish, lending support to the Australian currency.

The Australian currency is often effected by economic data from China, as much of Australia’s exports are China-bound. Data released on Thursday by the General Administration for Customs showed China’s exports rising by 0.9% in April compared to a month earlier. The figures also revealed that imports had risen by 0.8% in April after a drop of 11.3% in March. The data was much better than the 3.2% drop that analysts had forecasted. The AUD strengthened as a result.

On the sterling side of the cross, the pound is still faring well as UK economic data releases indicate that the economic recovery has now firmly taken hold. GDP figures released by the Office for National Statistics at the end of May showed UK first quarter growth of 0.8%, the fifith consecutive quarter of positive growth. The UK economy is now only 0.6% smaller than it was before the start of the financial crisis. The pound has benefitted as a result, trading at five-year highs against the US dollar and near fifteen-month highs against the euro.

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