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John from Moneycorp

Australian dollar update 16/11/2010

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QE MOVES FURTHER INTO THE WINGS

 

  • Quarterly Inflation Report assumes no fresh asset purchase by the Bank of England
  • Mixed signals from the Australian economy

After treading water on Monday and Tuesday the pound set off higher on Wednesday. It peaked early this morning, two and a half cents above last Monday morning's level, before dropping back to open in London two cents stronger on the week.

A dreary week for economic data added little to the fund of human knowledge. UK industrial and manufacturing production data for September were roughly in line with forecast. The broader industrial production figure (which includes energy and mining as well as manufacturing) rose by 0.4%. Traditionally, a monthly increase of 0.4% is considered acceptable even in good times because it extrapolates to an annual increase of 5%. This time, though, investors seemed underwhelmed by the achievement, probably because it was accompanied by a wider than expected trade deficit. The balance of trade in goods was -£8.2 billion and the overall shortfall was -£4.6 billion, both worse than predicted.

There were only a couple more ecostats, all from the private sector. Nationwide's index of consumer confidence faded from 53 to 52, the RICS house price balance hit an 18-month low at -49% and Rightmove's house price index fell by -3.2% in November after strengthening inexplicably by 3.1% in October.

The big news for sterling came on Wednesday with the Bank of England's Quarterly Inflation Report (it does what it says on the tin). Ahead of its publication, investors had been suspicious that the Bank would play down its expectations for inflation, so leaving clear its path towards a possible second round of quantitative easing (QE). What they got instead was an admission that "inflation is likely to stay above the 2% target throughout 2011, given the forthcoming rise in VAT and continuing increases in import prices". An "assumption" that "the stock of purchased assets financed by the issuance of central bank reserves remains at £200 billion" apparently kicked QE even further into the long grass. Sterling reacted positively to the report and spent the rest of the week reaping the gains.

New Zealand could come up with no more statistics than Britain but at least the two that did appear were interesting and helpful enough. Business NZ's purchasing managers' index improved minutely to 49.7 from 49.5 (itself revised upwards from 49.2). September's retail sales figure was good too, with a 1.6% monthly increase in September after zero growth in August. Motor vehicle sales expanded at exactly the same pace.

Australia had slightly more to say for itself on the economic front, though the message was not entirely coherent. The opening shots came with NAB's index of business confidence and Westpac's consumer confidence measure. Both were softer. Business confidence faded by 25% to 8 and consumer confidence fell from 3.3% to -5.3%. Investment and mortgage lending were both higher in September. Investment lending rose by 1.7% after falling by -3.9% a month earlier and home loans were up by 1.3% on the month.

Even the apparently strong employment figure had a downside. Another 29.7k people found jobs in October, more than the 20k that analysts had forecast. But the rate of unemployment went up as well, from 5.1% to 5.4%. Taken together, the week's data did not provide an indisputable case for the Reserve Bank of Australia to raise interest rates again at next month's meeting, especially having recently slipped in an unexpected rise.

The coming week will deliver some rather more heavyweight statistics, at least for the pound. They will include the consumer price index inflation numbers as well as UK employment, public sector borrowing and retail sales. From Australia there will be little beyond Tuesday's minutes of the last RBA monetary policy meeting. Although sterling looks as well-placed today as it has for several weeks there is no compelling reason to change the currency risk management strategy.

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Hi John

 

I appreciate the longer the forecast the bigger the estimation but, what is the longer term view of the £/$ exchange rate over say the next 6/9 months?

I know the last 12 months there has been a swing from a high of 1.82 to a low of 1.58. Where do you reckon the market will be heading?

 

I'm moving out to Aus next August so I'll be in touch when the rate is hopefully better

 

Thanks

 

Jon

ps excellent manufacturing growth from the uk may help, but the euro still a basket case, will that have a negative effect of the £?

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Hi John,

 

We want to transfer about £15,000 to AD in the next three weeks. What is the procedure? What is the transfer rate and fees ect. If we give £15,000 to Moneycorp, what is the final amount that will be in our bank account.

 

Thanks

 

Zoe

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Hi John

 

I appreciate the longer the forecast the bigger the estimation but, what is the longer term view of the £/$ exchange rate over say the next 6/9 months?

I know the last 12 months there has been a swing from a high of 1.82 to a low of 1.58. Where do you reckon the market will be heading?

 

I'm moving out to Aus next August so I'll be in touch when the rate is hopefully better

 

Thanks

 

Jon

ps excellent manufacturing growth from the uk may help, but the euro still a basket case, will that have a negative effect of the £?

 

Hi Jon

Thanks for your message.

In relation to the long-term view, it is very much uncertain because it dependent on so many variables – most starkly these include obviously the UK recovery and pace of this (how long this will take) – against the on-going strength of the Australian economy.

If you are moving out in August, it is recommended that you start to look at the different currency options available to you, as there is likely to be peaks over the next year where you could maximise the amount of Aussie dollars you receive for your pounds.

More information on the options available to you can be found here: http://www.pomsinoz.com/forum/money-transfer-ask-experts/77470-money-transfers-explained.html

Feel free to PM me and I will happily discuss further.

Kind regards

John

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Hi John,

 

We want to transfer about £15,000 to AD in the next three weeks. What is the procedure? What is the transfer rate and fees ect. If we give £15,000 to Moneycorp, what is the final amount that will be in our bank account.

 

Thanks

 

Zoe

 

Hi Zoe

 

The first step is to register for your free Moneycorp account which you can do at your convenience through the following link: https://members.tttmoneycorp.co.uk/OnlineExperience/PrivateClients/Enquiry.aspx?et=3&rp=10168283

 

As a Poms in Oz member, I can confirm that you would not pay any transfer fees when sending your money to Australia – there are no other fees payable to Moneycorp.

 

On the rates, that will be dependent on the day you book your currency as the market is constantly moving – once you are registered you will receive expert guidance from your personal dealer, and they can provide you live quotes at your request.

 

Thanks

 

John

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