Has Sterling peaked against the Australian Dollar? GBP/ AUD Update 4th August 2015
In the last Sterling/ Australian Dollar update back in July, I made reference to Sterling reaching a 6-year high against the Aussie Dollar at GBP/AUD 2.09. As you can see from the graph above, Sterling has hit GBP/ AUD 2.15 which is the highest level since March 2009. That move equates to an extra AUD 6,000 on a GBP 100,000 transfer to Australia.
The problem for the Australian Dollar is still a confidence thing. A further fall in commodity prices and renewed turmoil on the Shanghai stock exchange, the Hang Seng, where 8.5% was wiped off the value of China’s biggest companies on ONE day.
During the last week there was very little by way of economic data to give the Australian Dollar any support. Import prices rose by 1.4% in the second quarter while export prices were down by -4.4% (important – see below). Building permits went down by -8.2% in June. No inspiration to support the Aussie there!
Today the Reserve Bank of Australia kept its benchmark interest rate steady at 2% for the third month in a row. No surprises there nor any inspiration to buy the Aussie Dollar. Or so conventional wisdom would suggest.
On closer look at the graph above will reveal that so far today, GBP/ AUD has gone from 2.1445 to a low of 2.1141. A 3 cent decline (or 1.4%) since the Reserve Bank announcement. But why? As a customer said to me yesterday “…even if there is no cut, the rate will go up as the Aussie Dollar is still too strong…”
Well, the markets appear to be more comfortable of late with where the Australian Dollar is. Remember, we have seen a 16% decline in the value of the Aussie in the last 12 months against Sterling (it is 20% against the US Dollar). This decline will certainly be helping exporters. One final look at the graph will show that since May ’15 the rate has more or less gone in a straight line higher which is very rare for a currency without any sort of pull-back. If now is when we see that pull-back, have we seen the peak for now?