As much by accident as by design, the Australian dollar and the pound covered a range of less than two cents. Sterling opened in London this Tuesday morning fractionally ahead on the week. Looking back over the eight days it is hard not to conclude that the Aussie was lucky to have done so well.

Australian purchasing managers' index readings for the manufacturing and services sectors both came in below the line at 50 which separates growth from contraction. Manufacturing got a 49.5; services a 47.0. Building permits were down by -7.8% in February alone and by -15.2% on the year. Retail sales rose by a disappointing 0.2%.

The Aussie's main stumbling block was the Reserve Bank of Australia, which left its Cash Rate benchmark at unchanged 4.25%. Although investors had not been expecting any change they were discouraged by the tone of the RBA statement, which hinted at lower rates in the future.

 

The Australian dollar has strengthened – this is due to positive job figures released in Australia.

Concerns still remain over the European situation, however the better-than expected employment figures have provided a boost. Total employment rose 44,000 to 11.491 million in March, according to the Australian Bureau of Statistics on Thursday.

 

How do you think the dollar / pound will compare with the London Olympics this summer. Do you foresee any movement in favour of the pound?

 

In isolation, the event usually does not have an effect on exchange rates - therefore, the Olympics is unlikely to have a significant impact – if, for example, it was more commercially successful than anticipated (or not), there could be more of an impact.

The Olympics has been a known event for some time therefore any impact has already been factored into the current market price. Clearly, the event will provide incoming cash generation however this will only be a short term benefit for the UK economy.

If the event is positively received, it could give a boost to Britain as a destination for inward investment – this would lead to positive effects for future economic growth and could potentially provide an improvement in the £ in the longer term.

Thanks

John