It may be until mid 2008 until we see sustained weakness in the
AUSTRALIAN DOLLAR
High commodity prices, sustained growth in the Australian economy and
the resulting house price explosion has most indicators pointing to
several interest rate hikes by the Reserve Bank of Australia (RBA). As a
result we could be waiting until mid-2008 for any respite from the RBA.
GB POUNDS /AU DOLLAR remains firm in the 2.24 range with AUD/USD is
trading well above the 90 cent level at 0.9218. All eyes in the short
term will be on the US Fed as they decide whether to cut interest rates
this afternoon. A cut any greater than the 25 basis points expected will
see further strength in the AU DOLLAR.
Sterling hit a historic 23 year low this morning of 2.2181 against the
Australian dollar as the high yielding currencies came even more into
favour.
The pound also saw a 33 year low against the Canadian dollar at 1.9685.
On Wednesday we see the release of UK consumer confidence data, US GDP
data and the all important US fed announcement on interest rates.
The market is likely to be reasonable quiet leading up to Wednesday’s
decision when a clearer trend is likely to emerge. The market has priced
in the FED to cut rates by 25bp to 4.50%. The major reason for such
AUSTRALIAN DOLLAR strength comes from expectations of rate cuts in the
UK with the opposite happening to other currencies like the EURO and AU
DOLLAR where increases are expected by early next year if not earlier.
Expect more Australian dollar strength in the short tern. We are currently
trading at 2.2359 at inter bank.
We expect a range today in the GB POUND / AUSTRALIAN DOLLAR rate of
2.2730 to 2.2830.
The Pound Sterling continues to roam below 2.30 as the Australian dollar
remains strong. We are currently trading above the low of 2.2435 on 12th
October at 2.2725.
In the UK Kate Barker a member of the Bank of England’s Monetary Policy
Committee announced that at present UK house prices appear to be over
valued. This has been fuelled by the buy-to-let market which has been
the main ‘source of weakness.’ This suggests that it is very unlikely
that a UK rate cut will occur in November and we will therefore have
steady UK interest rates probably until February next year. This on the
upsides underline the fact it is unlikely that the UK will see a rate
cut in the near-term but also tells us the MPC is unlikely to move rates
to 6%, a level the market expected earlier this year. It look at present
that GBP is going to continue trading between 2.26000 and 2.2900 as the
financial markets remain volatile.
We expect a range today in the GB POUND / AUSTRALIAN DOLLAR rate of
2.2730 to 2.2830.
GBP finally rallies against the strong Australian Dollar
The pound: edged higher against the US dollar overnight as continuing
concern over the near-term future of the US economy saw traders
increasing bets that the US Fed will be lowering interest rates in the
near future.
Sterling strengthened against the Australian dollar after stronger than
expected UK GDP data (economic indicator) providing the pound with some
short-term direction. The rate should continue to rally going into early
next week breaking though the 2.30 benchmark.
The current exchange rate at inter bank to buy Australian dollars is
2.2929
GBP finally rallies against the strong Australian Dollar
The Aussie dollar has been subject to some massive selling which has
given us some respite on the GBP/AUD rate. Perceiving further risk in
the market investors are selling off AUD and NZD assets in a reversal of
what is known as the carry trade (investors borrow in low-yielding
currencies (JPY) to invest in high-yield assets (ie. AUD, NZD).
We expect a range of 2.28 to 2.3150 today.
Wednesday 10th October 2007 Interbank rate: GB POUNDS
/AUSTRALIAN DOLLARS2.2690
The Pound Sterling has continued to rally against the Australian dollar
throughout the day and is currently up 1 cent from the days low of
2.2630.
The pound has benefited from a weak US Dollar and the announcement of a
narrowing in the UK Trade Gap implying export growth is strong. The
trade deficit fell in August from 4.6 billion in July to 4.1 billion.
Looking at the currency pair history the pound is still remarkable low
against the Australian dollar, the lowest for over 5 years. This leaves
buyers in a difficult position as the currency pair continues to hover
around this level. The market will need to see more positive news for
the UK and the pound before we see any significant movement up in the
exchange rate.
The Australian Dollar continues to Press higher against the Pound and
US Dollar.
The Aussie dollar shrugs off strong payroll data in the US to hover
around the 90 cent level. Strong demand via the carry trade and the
expectations that the Reserve Bank of Australia will raise the base rate
once more in November has strengthened the Aussie further.
Sterling fell against both the US DOLLAR and Aussie on Friday and has
failed to pick up any momentum on Monday. Expect a GB POUND /AUSTRALIAN
DOLLAR range of 2.25-2.27 today.
The Australian Dollar continues to Press higher against the Pound and
US Dollar.
The Aussie dollar continues to press higher against the Pound and US
Dollar. There is still a supply shortage of housing in
Australia which continues to push prices upwards. Coupled with strong
commodity and gold prices and an ailing US Dollar we have seen the AU
Dollar push through critical levels against the US Dollar and Sterling.
Today all eyes will be on the non-farm payrolls due out at 1330 GMT
today. If the figure is less than 100,000 new jobs added expect a
further collapse of the US Dollar. If the figure surprises to the upside
then both Sterling and the US Dollar will recover against the Aussie
dollar.
Sterling continues to bear the brunt of the weakness in the credit
markets and fears of a correction in UK house prices.
The Bank of England is coming under increased pressure to ease interest
rates here. In Australia the exact opposite seems to be happening .
Inflationary data has come out stronger than expected and there are
signs that the Australian economy is overheating. As a result there is
increased pressure on the Reserve Bank of Australia (RBA) to increase
the interest rates further.
Added to this we have commodity prices and spot gold prices at or around
30 year highs which puts further weight behind the AUSTRALIAN DOLLAR.
Furthermore, international funds and investors have seemed to shrug off
the very real concerns in markets and taken on more risk by buying high
yielding currencies such as the Aussie dollar.
The ‘carry trade’ as its known in the markets seems to be back on and
this will keep the Australian Dollar strong for the foreseeable future.
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