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Australian Dollar Forecast to Pressure the Pound this Week, Housing Data will be Important this Week

australian dollar rate

The GBP/AUD exchange rate has reached a crossroads and is vulnerable to more downside in the near-term.

Recently the Pound has pulled back against the Australian Dollar with GBP/AUD falling back into its trendline. 

Although it has not yet broken below here there is a risk of that happening this week.

The implications of a break below 1.6775 would confirm and lead to a bigger sell-off, and the start of a possible reversal of the short-term uptrend.

Therefore those with payments should carefully consider ensuring their stop-loss orders are placed around such levels in order to protect their purchasing power.

Normally when price breaks below a trendline it travels a distance below the break equal to the size of the move immediately prior to the break. 

In this case was from about 1.7200 down to 1.7000.

Which indicates a break of the trendline would probably reach the double layer of support at around the 1.6600 level composed of the monthly pivot (PP) and the late November lows.

GBPAUDDec11

The main data release for the Aussie Dollar in the week ahead is the labour market release due out at 00.30 (GMT) on Thursday, December 15, which includes the Unemployment Rate and Employment Change in November.

The headline employment change figure is forecast to read at 20K, an improvement on the previous month's 9.8K.

The implication of a better-than-forecast reading would be a stronger Aussie Dollar as the Reserve Bank of Australia would certainly be unwilling to cut interest rates any further with the labour market improving.

Watch the release of the House Price Index (Q3) at 00.30 on Tuesday, December 13.

Concerns about Australia’s plateauing housing market may weigh on the Aussie Dollar in the coming week.

According to analyst Honglin Jiang of Credit Suisse, the Housing Market is set to slow and this will weigh on the economy going forward.

Housing is key in that it is linked to consumer confidence - when house prices are rising consumers are likely to be in spending mode as their overall wealth is increasing.

The Australian economy has had to adjust away from mining and towards the consumer after the mining boom seen at the turn of the decade ended. 

Whilst it is true that the recent recovery in Iron Ore prices, Australia’s key export, has supported AUD but analysts do not see the effect lasting, as volumes remain low compared to the boom period in 2010-12.

Therefore, it is important that the diversification of the Australian economy away from mining towards the consumer continues.

But, with house prices slowing, that transition could also be challenged.

Latest Pound / Australian Dollar Exchange Rates

United-Kingdom Australia
Live:

1.648▼ -0.26%

12 Month Best:

2.0663

*Your Bank's Retail Rate

 

1.5919 - 1.5985

**Independent Specialist

* Bank rates according to latest IMTI data.

** RationalFX dealing desk quotation.

 

Data and Events to Watcg for the Pound this Week

The Bank of England (BOE) interest rate meeting on Thursday, December 14 at 12.00 (GMT) is the main economic data event in the week ahead, and although no change of policy is expected the minutes, released immediately afterward, could be instructive in showing members thinking on future policy.

UK inflation will be brought under the spotlight on Tuesday, December 13 when November CPI is released at 09.30.

The annualised figure is forecast to read at 1.1%, up from the previous month's 0.9%.

A beat on this figure would prove beneficial to the Pound in that it would imply the Bank of England may have to raise interest rates at some point in the future in an attempt to keep inflation settled.

However, if the figure underwhelms then Sterling could struggle.

On Wednesday, December 14 at 09.30 the ONS release Unemployment data, which is forecast to show a 4.8% Unemployment rate (Oct), a 5k rise in the Claimant Count (Nov)and Average Earnings Including Bonuses (Oct) rising by 2.3%.

On Wednesday, December 14 at 09.30 the ONS release unemployment data, which is forecast to show a 4.8% unemployment rate (Oct), a 5k rise in the Claimant Count (Nov) and Average Earnings Including Bonuses (Oct) rising by 2.3%.

On Thursday, December 14 at 09.30 Retail Sales in November is released and expected to come out at 0.2% month-on-month.

If these data remain robust then Sterling should be able to enjoy the fundamental support required to keep its recent recovery move in place.

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