As requested by a number of Brits in Brisbane regulars, here’s an update of what's been happening in the FX Markets throughout April.
The start of the month saw The Australian Dollar hovering around 12-year highs against a broadly stronger Pound, but a disappointing Chinese growth report took the steam out of its rebound, which had been driven by brave bets that the world economy was stabilising. Reaction was relatively muted after Australian business confidence recovered slightly in March, but remained near 7-year lows with depressed sales and profits forcing firms to cut jobs at a faster pace. However, the Aussie managed to claw back some of its earlier losses on the back of stronger equities, with the market brushing off news that Australia’s export prices fell by their largest amount in six years last quarter. The 4.6% drop was driven by double-digit losses in the price of metals, a taster of things to come in contract negotiations for key commodity exports.
Recent data also showed Australia shed jobs at the fastest pace in six years in March while unemployment jumped by the most since the 1991 recession to 5.7%, piling on pressure for yet more policy stimulus. The data came after Australia’s Central Bank cut its key cash rate by 0.25% to a record low of 3.00%, marking the sixth easing in eight months in an effort to cushion households from a shrinking economy and rising unemployment.
GBP/AUD edged lower as the UK Budget announcement confirmed the magnitude of the task facing the UK. Meanwhile subdued investor risk appetite for commodity currencies was overshadowed by a stubbornly high reading of Australian core inflation, casting doubt on the prospect of a May rate cut. The consumer price index rose by 0.1% in the first quarter, bringing the annual rate of inflation down to 2.5% from 3.7% in the previous quarter. It also brought CPI back within the RBA’s 2-3% target band for the first time since late 2007. However, the low result was mainly due to a steep 14% drop in deposit costs, which reflect the RBA’s aggressive rate cuts in official interest rates. The RBA focuses on two measures of core inflation, which strip out the biggest price moves in either direction to determine the underlying trend. These rose by an average 1.1% in the first quarter with the annual pace slowing only marginally to 4.15% from 4.35%.
Current Central bank rates:
OZ: 3.00% (Next meeting 2nd June)
US: 0.25% (Next meeting 24th June)
ECB: 1.00% (Next meeting 4th June)
High & Low of the month (April):
High: 2.0969 (on the 03/04/09)
Low: 2.0081 (on the 30/04/09)
Difference in cost on a £200k property:
High: 419,380 AUD
Low: 401,620 AUD
A difference of 17,760 AUD.
Going forward most industry analysts still expect continued volatility. No surprises there!
Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.
I will post a further update next week.
Last edited: May 11, 2009