Pound Sterling to Australian Dollar, New Zealand Dollar: GBP/AUD slides on Strong Australian CPI, GBP/NZD Soft
‘Aussie’ Bullish on Strong Inflation Performance
Australian Inflation performed better-than-expected in the final quarter of 2015, rising 1.7% year-on-year (YoY) after last month’s growth of 1.5%. Quarter-on-quarter (QoQ) Consumer Prices increased 0.4% instead of the 0.3% anticipated. Alcohol and tobacco saw the largest increase in prices, with a QoQ rise of 2.7%, the equivalent of a 6% rise year-on-year. Communication performed worst of all, with prices dropping -2.4%, or -6.3% YoY.
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Pound Strengthening as Markets Decide Carney was Upbeat
It seems that, after a pause to think about it, the markets have concluded that Bank of England (BoE) Governor Mark Carney gave upbeat comments regarding the state of UK financial stability. The Pound is starting to erode losses.
Commodity-correlated currencies are experiencing a rebound today after being pushed down by falling oil prices, with the Australian Dollar and New Zealand Dollar buoyed by oil breaking above US$30 per barrel.
GBP/AUD Soft on Hopes of Imminent Chinese Economic Stimulus
The Pound is soft today despite uncharacteristic comments from Bank of England (BoE) Chief Economist Andy Haldane, who has been much more upbeat about the UK and world economies than usual. Haldane has said in an interview that, while events in China and other global factors could slow growth, the UK economy continues to grow steadily and it is unlikely the world will slip into negative growth.
Another slump in oil prices during the Australasian session caused a fresh rout in the Chinese stock market, with the Shanghai Composite Index closing down -6.4%, hitting its lowest level since the beginning of December 2014. The approach of the Chinese Lunar New Year (Chinese New Year) is adding to the volatility in the markets. Market will be closed for the week-long holiday, causing reluctance among investors who do not wish to invest in case there are any sharp falls in markets overseas during the period.
The Spring Festival could be an advantage for those hoping for additional stimulus measures from China. Investors are expecting the People’s Bank of China (PBoC) will want to act before the holiday period, meaning there might soon be news of additional stimulus measures. Any attempt to boost the economy will increase demand for Australian and New Zealand goods and services, helping the antipodean countries to strengthen their own economies.
Australian inflation data is due out during tomorrow’s Australasian session.
GBP/NZD Holding Opening Levels on Oil Rebound
There has been a lack of UK data today to support Pound Sterling, although BoE Governor Mark Carney has been speaking to the Treasury Committee regarding the UK’s financial stability. He has offered some reasonably hawkish comments, claiming that there are no direct or indirect stresses on UK banks and that strong progress has been made on the Counter Cyclic Capital buffer, which will protect UK lenders in the event of another financial crash. He has also said that OPEC’s influence over oil prices has diminished.
When asked, he did not rule out the possibility of extending his current five year term to the full eight allowed.
The New Zealand Dollar is strong ahead of the interest rate decision by the Reserve Bank of New Zealand (RBNZ), which is expected to see no change to the Official Cash Rate (OCR). Markets do expect a -0.25% cut to the OCR by August, but economists have cited strong economic data which suggests the RBNZ will not need to act at the forthcoming policy meeting. The decision will be announced tomorrow, along with New Zealand’s Trade Balance figures.
Current GBP, AUD, NZD Exchange Rates
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is currently trading around 2.0342, while the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is trending in the region of 0.4886.
The Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is currently trading around 2.1949, while the New Zealand Dollar to Pound Sterling (NZD/GBP) exchange rate is trending in the region of 0.4528.