A shock drop in US Non-Farm Payrolls data for August has shifted the GBP/AUD rate into the 1.76’s this afternoon for the first time since July. There appeared to be a sell-off of US dollars in the immediate aftermath as the low data raises questions with regards to the US rate hike.
Sterling however has had its best week since the EU Referendum vote after there was positive data from the manufacturing and construction sectors. The recent doom and gloom from the Brexit has no doubt had a major effect on the market however the fallout appears to not be as bad as many expected.
Moving forward any good news for Sterling will certainly be received very well and could cause major movement in the GBP/AUD exchange rate.
Australian Dollar Top Reached
In my opinion the GBP/AUD rate has reached a low and going forwards the exchange rate will move back towards the 1.80’s. The Reserve Bank of Australia has set themselves up for further interest rate cuts as they have to manage low inflation levels domestically, facilitated by a strong currency and a housing boom. Whilst cutting the interest rate makes housing more attractive it does weaken the currency which could start to help inflation improve.
There are many factors effecting the currency markets at the moment and whilst some things can be prepared for, there are always surprises.
Bank of England Premature
The Bank of England after good industrial data has come under pressure of acting to swiftly. Having only waited for one full months’ worth of data after the Brexit vote to change interest rates they may have jumped the gun. What it does mean is that a second cut which may looked on the cards could be avoided and this would massively help Sterling to improve.