The pound trades below 1.5 level against Australian dollar, could there be some AUD weakness around the corner though?

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Published on Tuesday, 31 July 2012 09:34

Written by Will Peters

"We take a view that QE3 speculation is probably overdone and the market may be disappointed tomorrow morning. So there may be some aussie dollar weakness around the corner" - Caxton FX.

The Australian dollar continues to dominate the UK currency as low UK interest rates continue to bite; indeed, expectations for even lower rates in the near future are driving bids yet lower.

The pound to Australian dollar exchange rate is 0.39 pct lower on a daily basis at 1.4904.

The pound to New Zealand dollar exchange rate is 0.32 pct lower at 1.9351.


"Where we continue to see problems for Sterling is against the high yielding Australian and New Zealand Dollars. Both currencies offer significantly better economic back drops, largely due to china and have significantly lower debt to GDP ratios," says a morning client note from HiFX.

Richard Driver at Caxton FX says the Australian currency continues to top the market’s wish list:

"The aussie dollar continues to trade impressively amid expectations that central banks in the US and Europe could introduce monetary easing measures. Building approvals data from Australia was also much better than expected overnight.

"We take a view that QE3 speculation is probably overdone and the market may be disappointed tomorrow morning. So there may be some aussie dollar weakness around the corner. For now, this pair trades at 1.4930."

Meanwhile, sterling traded sideways around its 1.94 lows, with stronger kiwi business data helping the NZD.

The news that China is looking to provide more stimulus to its slowing economy is fuelling some decent demand for the Antipodean currencies. Anticipation of emergency action from the Fed and the ECB has lifted market sentiment, which is being reflected in some impressive gains in Asian equities.

"Sterling is trading down below 1.94 and the pound is likely to remain under pressure unless the Fed announces no action, which we think will happen," says Driver.