Australian dollar loses further ground to GBP, 1.5 beckons once more as UK economy defies the odds

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Category: Australian Dollar News

Written by Sam Coventry

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The RBA has reported the volume of loans to Australian business has picked up sharply over recent months and are now growing at an annualised pace of 8 pct.

The pound to Australian dollar exchange rate is 0.2 pct higher on a daily basis, GBP-AUD is at 14965 at 10:40 in London.

The psychologically important area of 1.5 is again in reach, but advancing north of here will require an extra push, as is often the case with these significant levels.


There is a sense that the UK economy is in fact on the recovery path after retail sales volumes rose 0.3 pct on the month to give an annual increase of 2.8 pct.

Consensus forecasts were pencilling in a monthly fall of 0.1 pct.

The ONS also revised sales growth in June to 0.8 pct from a previously reported rise of 0.1 pct, reducing the overall decline in retail sales in the second quarter to just 0.3 percent versus the previous three months.

Together with significant upward revisions to second-quarter construction and manufacturing figures, the latest data increased the chance that the originally reported 0.7 pct drop in GDP will be revised up.

Meanwhile in Australia the RBA has reported the volume of loans to Australian business has picked up sharply over recent months and are now growing at an annualised pace of 8 pct.

"While not as fast as the very strong double-digit growth rates seen in the run-up to the global financial crisis, this is still a good result by past standards," says Kieran Davies at Barclays.

The recovery in lending followed a sharp cut-back in loans over 2008-09, when loans shrank at a rate similar to that seen during the early 1990s recession.

What's more, it has been shown that Australian business are less reliant on bank lending than counterparts in larger developed countries.

This low level of gearing has not stopped business investment from accelerating rapidly as mining companies flush with cash have easily funded an unprecedented expansion of capacity from retained earnings.

That is, extremely profitable miners have little reliance on banks for funding, with the resources sector accounting for less than 3% of bank loans to business.