GBP-AUD Foreign Exchange Rate Soars

as Greece in Limbo

Interested to buy Australian dollars? The GBP-AUD foreign exchange rate is rising. Our guest blogger Peter Lavelle will be happy to help.

Below is his latest update of the British pound to Australian dollar foreign exchange rate, covering the 10th to 17th May 2012.

The GBP-AUD Foreign Exchange In The Past Week:

  1. The pound remains close to its highest rate against the Australian dollar since October 2011 right now, as Greece's future in the euro remains in limbo.

    The potentially catastrophic implications of Greece exiting the euro have crushed appetite for commodity currencies like the AUD, explaining the pound's foreign exchange gains this past 10 weeks.

  2. In addition, the Australian dollar has weakened following a series of disappointing economic releases from Australia.

    This month the Reserve Bank of Australia cut interest rates for instance, making returns on Australian investments less impressive.

    In addition, Australia endured an uncharacteristic back-to-back trade deficit last month, as economic activity in its main trading partner (China) cooled down.

    Both these events have made the AUD less attractive.

  3. In spite of all these events benefiting the pound, this past week the UK currency has in fact stood stock-still against the Australian dollar.

    This is because the Bank of England cut its 2012 growth forecast for the UK, warning that the crisis in Europe is going to drag out the recovery.

    In addition, spikes in energy prices mean inflation will remain high until 2013, hence killing consumer demand.

    These factors contributed to pound stability against the AUD this week (as opposed to a climb.)

In Focus: Greece to Exit The Euro?

It might sound strange, but the biggest thing affecting the pound to Australian dollar foreign exchange rate right now comes from neither the UK nor Australia.

Instead, the problem is whether Greece will exit the euro inside the next few weeks.

This is important because the implications of a Greece exit could be huge, including up to $1tn in financial losses across Europe according to one estimate, while ending the idea of the euro as an irreversible aspect of European integration.

These possibilities have the markets spooked, causing a huge loss of appetite for currencies dependent on commodities (such as the AUD) and hence explaining the flee to the pound, as something comparatively stable and reliable.

GBP-AUD Foreign Exchange - The Next Week

Greece is going to continue to dominate the GBP AUD foreign exchange rate.

It holds its second general election in a month, at which point we find out if anti-euro parties in Greece can form a government.

If that's so, then risk appetite will decline further, helping the pound even higher against its antipode rival.

Yours kindly,

Peter Lavelle with Pure FX

Like This Page?