GBP/AUD jumps to $1.86

GBP/AUD rises after Bank of Canada cuts interest rate

It’s been a fairly volatile week for GBP/AUD with better Chinese data lifting the Australian dollar earlier in the week, only for it to be dealt a blow after the Bank of Canada cut its interest rate on Wednesday – forcing the Australian currency lower as investors pulled out and moved in to the US dollar. The Australian dollar subsequently lost over 2% to the pound over the course of Wednesday afternoon. The graph below shows GBP/AUD movement over the last 7 days.

GBP/AUD

GBP/AUD 7 Days

 

Chinese data on Tuesday showed growth rising at an annual rate of 7.3% in the last quarter of 2014. The figures were a little better than expected, with most analysts expecting a rise of around 7.2% and the Australian dollar gained as a result.

The Aussies keep a close eye on Chinese data, with most of Australia’s exports destined for Chinese ports. Australia supplies China with much of its iron ore which the Chinese then use to make the steel destined for their expanding manufacturing and production sectors. Therefore, strong data will often strengthen the Australian currency as it signals strong demand from China.

However the gains were short lived as the IMF released its growth forecasts for the global economy, downgrading forecasts for most of the industrialized nations. The Aussie subsequently lost the ground it had gained after the Chines data. Following the Canadian announcement, the Aussie lost 3 cents against sterling, shooting back up towards $1.87. The Canadian move came as a surprise and has fuelled speculation that the RBA may follow suit as global economic conditions deteriorate. Analysts estimate that there’s now a 40% chance of the RBA lowering rates as early as next month.

The QE announcement from the European Central Bank has had little impact on GBP/AUD rates, pushing the rate down slightly to settle in the mid $1.86’s. There was fairly significant movement in other crosses, with GBP/EUR touching €1.32, the pound dropping a percent against the US dollar and movement of over two cents in EUR/USD.

Are you concerned about the recent volatility?

If you need to exchange any of the major currencies and are worried about the recent volatility in the markets, contact me for a free, no obligation consultation on the details below.

 

James Baxter

+44 (0)1442 892062

[email protected]