$AU to GBP Rates
Sep 13th 2005, 4:05 pm
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Joined: Jan 2005
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$AU to GBP Rates
Money corp send me the weekly update for currency conversation news. Thought some may be interested - although its not that great an outlook.
AUD - Australian Dollar
Two weeks ago the US dollar suffered a sharp sell off when the southern states were devastated by hurricane Katrina. Oil production and refinery activities around the Gulf coast were brought almost to a complete stop. Suspicions were voiced that the Federal Reserve may suspend the strategy of tighter money that was expected to add at least a further half percent this year to the current Fed funds rate of 3.5%. Over the course of the last week the foreign exchange market has reappraised the situation. Refinery capacity is being restored and strategic petroleum reserves have been released. Whilst the removal of manufacturing and commercial businesses is expected to slow the economy in the short term, the rebuilding effort will add to activity in later quarters. At its meeting next week, the Federal Open Market Committee is once again expected to proceed with its policy of higher interest rates.
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The US dollar trended stronger against most currencies over the last week, making ground against both the kiwi dollar and the pound. The aussie dollar, almost uniquely, rose against the US dollar. Sterling, which opened last Monday above A$2.40, lost more than three cents over the seven days.
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Economic data for the major currencies were not scrutinised as closely as usual last week. The market preferred instead to peer hopefully through its binoculars at the longer-term picture. For Australia, however, that long-term picture received a boost from good GDP and employment figures. Second quarter GDP growth exceeded expectations at 1.3%, achieving a worth 2.6% for the year. Employment rose yet again, this time by nearly 33,000 in July, leaving the headline unemployment rate at 5.0%. The Reserve Bank, as anticipated, left the cash rate target unchanged at 5.5%.
�*
The OECD downgraded to 1.9% its estimate of UK economic growth for the current year. This would leave it well short of the chancellor’s earlier projections of 3.0%-3.5%. On the positive side, three indices showed house prices rising at a rate of between two percent and four percent over the year. The Halifax actually measured a 1.6% rise for the month of August on its own but nobody tried to project that into the 20% annual rise that it would appear to suggest. The Monetary Policy Committee elected to hold base rates at 4.5% and the belief continues to grow that no further rate cuts will be forthcoming this year.
�*
Sterling interest rates look good but aussie rates look better, and the relativity is not about to change. Seekers after yield are putting their spare cash into the aussie dollar in preference to sterling. Expect the pound to continue looking heavy against the aussie over the coming week.
�*
So what to do?
�*
With sterling looking likely to weaken against the aussie dollar, buyers of the Australian currency should look to protect themselves from this risk.
AUD - Australian Dollar
Two weeks ago the US dollar suffered a sharp sell off when the southern states were devastated by hurricane Katrina. Oil production and refinery activities around the Gulf coast were brought almost to a complete stop. Suspicions were voiced that the Federal Reserve may suspend the strategy of tighter money that was expected to add at least a further half percent this year to the current Fed funds rate of 3.5%. Over the course of the last week the foreign exchange market has reappraised the situation. Refinery capacity is being restored and strategic petroleum reserves have been released. Whilst the removal of manufacturing and commercial businesses is expected to slow the economy in the short term, the rebuilding effort will add to activity in later quarters. At its meeting next week, the Federal Open Market Committee is once again expected to proceed with its policy of higher interest rates.
�*
The US dollar trended stronger against most currencies over the last week, making ground against both the kiwi dollar and the pound. The aussie dollar, almost uniquely, rose against the US dollar. Sterling, which opened last Monday above A$2.40, lost more than three cents over the seven days.
�*
Economic data for the major currencies were not scrutinised as closely as usual last week. The market preferred instead to peer hopefully through its binoculars at the longer-term picture. For Australia, however, that long-term picture received a boost from good GDP and employment figures. Second quarter GDP growth exceeded expectations at 1.3%, achieving a worth 2.6% for the year. Employment rose yet again, this time by nearly 33,000 in July, leaving the headline unemployment rate at 5.0%. The Reserve Bank, as anticipated, left the cash rate target unchanged at 5.5%.
�*
The OECD downgraded to 1.9% its estimate of UK economic growth for the current year. This would leave it well short of the chancellor’s earlier projections of 3.0%-3.5%. On the positive side, three indices showed house prices rising at a rate of between two percent and four percent over the year. The Halifax actually measured a 1.6% rise for the month of August on its own but nobody tried to project that into the 20% annual rise that it would appear to suggest. The Monetary Policy Committee elected to hold base rates at 4.5% and the belief continues to grow that no further rate cuts will be forthcoming this year.
�*
Sterling interest rates look good but aussie rates look better, and the relativity is not about to change. Seekers after yield are putting their spare cash into the aussie dollar in preference to sterling. Expect the pound to continue looking heavy against the aussie over the coming week.
�*
So what to do?
�*
With sterling looking likely to weaken against the aussie dollar, buyers of the Australian currency should look to protect themselves from this risk.
