UK Pound to Australian Dollar

Continues to Shoot Up

Peter Lavelle - 23.03.2012

Hello there!

Welcome to my latest update regarding the UK pound to Australian dollar foreign exchange rate, covering the period 15-22nd March. It's intended to give you a heads up about the exchange rates, and let you know what kind of rate you can expect when you relocate to Australia!

UK Pound Claws Back Ground

This week, the UK pound has continued to claw back ground against the Australian dollar, climbing from 1.495 to 1.52.

This is the highest rate for sterling in 3 months, and marks a continuation of its upward momentum begun in mid-February.

The reason, as ever, for this continued reversal in the fortunes of the AUD is China, where manufacturing output has declined for the 5th month on the trot.

However in addition, predictions that the UK will expand at a faster rate than previously predicted in 2012, have not hurt the UK pound's fortunes.

Chinese Manufacturing Slows

Output in China gargantuan manufacturing sector plummeted at a faster pace this month, dropping to 48.1 (compared to forecasts of 49.6) on the HSBC PMI.

This signals not only that Chinese manufacturing is not growing (figures beneath 50.0 point to decline) but that it's shrinking at a greater pace than economists expected, signalling a serious spanner somewhere in China's economic works.

This kept the Australian dollar on the back foot because (as surely everyone and his uncle knows by now) Australia's economy depends almost totally on Chinese demand for its raw materials for growth. So if Beijing blows a fuse in other words, the lights go off in Canberra.

UK Growth Forecast Upgraded

uk pound to australian dollar up

For once though, the pound managed to pull its own weight somewhat this week, as UK economic growth for 2012 was upgraded +0.1% to 0.8%.

Now, you might call 0.1% small potatoes, especially when the Chinese consider 7.5% economic growth (predicted in 2012) a bit disappointing. But in a country like Britain which has trouble staving off recession, let alone expanding like it's supposed to, a 0.1% upgrade in the outlook is a reason to open the champagne and party hats. (Part II is following through on these forecasts of course.)

UK Pound to Australian Dollar Exchange Rate - Looking Ahead

Looking ahead, the fate of the UK pound-to-Australian-dollar exchange rate once again hangs on China.

Will its demand for Australian minerals continue to slow?

Will Beijing find a solution to its economic slowdown?

It's these questions that will determine if the pound continues to strengthen, providing good news if you're planning to move to Australia.

I will of course return with my next foreign exchange rate update next week.

Yours kindly,
Peter

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