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AUD/GBP keeps on trucking

Written by Sam Coxhead on July 7th, 2011.      0 comments

3:03 PM (NZT)  Statistics Australia just released the latest employment statistics. These were stronger than expected and the unemployment rate remains at an impressive 4.9%. The boost to jobs growth came via the full time component, which more than offset the weaker performance in part time jobs growth.
The key for this number is the weighting that the employment sector is in the Reserve Bank of Australia’s (RBA) thinking with regards to cash rate movements. Earlier in the week the Retail Sales and Building Consents numbers disappointed before the RBA left the cash rate unchanged and flagged that the cash rate would remain static for sometime. Since the release of the employment figures the AUD has responded strongly and the interest rate market now has just under a 50% chance of a 25pt hike in the cash rate priced by the December meeting.
If we now see a pickup in other economic indicators further pressure will come on the RBA. Later on today we have the Bank of England’s(BOE) decision on Monetary Policy. They will certainly not be hiking the cash rate, but the focus will be on any change to the Quantitative Easing component. If they do this, the GBP will react negatively, albeit a small chance they do make a move.
The current AUD/GBP is .6620 after today’s move in the AUD and current levels represent very good value buying of GBP with AUD. Without much prospect of any kind of reall appreciation from the Pound Sterling in the short term, any correction lower in this pair will be driven by some kind of AUD weakness.