Pound sterling surges to 1.6 versus the Australian dollar; Aussie takes 'another broadside' as GDP disappoints

At 8:45 in London we see the pound sterling 0.85 pct higher on a daily basis against the Australian dollar (Currency:AUD). GBP-AUD is at 1.6002 - we haven't seen these levels since May 2012.

Elsewhere the Australian dollar / US dollar exchange rate is 0.7 pct down at 0.9582 while the euro / Australian dollar exchange rate is 0.7 pct higher at 1.3653.

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GBP-AUD surges to 1.600

The Australian dollar is feeling the heat again today.

Jeremy Cook at WorldFirst says:

"Overnight the AUD has taken another broadside from traders after GDP numbers for Q1 disappointed. Output increased by 0.6% between January and March which was the slowest since 2011 and almost guarantees that a rate cut is pencilled in for the RBA’s next meeting in early July."

A look at the Australian GDP numbers

Q1 GDP growth was a little weaker than expected at +0.6% q/q and 2.5% y/y (analysts had expected growth at +0.7% q/q).

Growth was unrevised at +0.6% q/q in Q4 2012 and year-ended growth in Q4 2012 was revised only 0.1ppts higher to 3.2% y/y.

"The major downside surprises to us were weaker-than-expected household consumption and business investment. Household consumption grew just 0.6% q/q (despite strong retail trade volumes growth). Meanwhile, new engineering construction contracted a sharp 5.7% q/q and machinery & equipment investment was 5.4% q/q lower (we expected less severe contractions)," says Justin Fabo at ANZ Research.

The Australian dollar could head towards 0.9 against the US dollar

Stan Shamu at IG Index in Melbourne warns that currency traders will be eyeing further opportunities to sell AUD:

"Quarterly GDP data showed a 0.6% rise versus 0.8% consensus. This rattled confidence a bit more and the AUD fell to a low of 0.96 against the greenback. Traders are likely to be still eyeing to sell the pair into strength and we might see it head towards last week’s lows in the near term."

Shamu's colleague at IG, Chris Weston, has chimes in with the observation that the Australian dollar was already under pressure ahead of the GDP release courtesy of the Reserve Bank of Australia:

"In terms of yesterday’s RBA statement, the bank left its easing bias very much in place with the last paragraph suggesting it still has scope to ease if it needs to support demand.

"On the exchange rate side, it is obviously pleased the local currency is going in the right direction, but it still sees the AUD high considering the decline in export prices. This says to us that the new range the pair has established at 0.9500 to 0.9800 is still elevated and we would prefer the unit closer to 0.9000."