A static interest rate outlook and equally dismal economic performance in recent weeks have left traders uncertain about the relative strength balance between the Pound and the Australian Dollar. This has left the pair tied in a well-defined range, and will likely keep it so until one of the central banks steps in to ease borrowing costs.
[B]Trading Tip [/B]– Traders may see GBPAUD volatility in the coming days as recent headlines have pointed to significant spillover of the US subprime fiasco into the Australian baking sector. National Bank of Australia, the country’s largest banking institution, has recently reported $450 billion in write downs for subprime-related assets. The news saw Australia’s benchmark equity index drop nearly 1% today. Indeed, In addition to a stop loss, we will look to control risk further by removing any unfilled orders by the end of the week should spot close above 2.0680.
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Event Risk for the UK and Australia[/B]
[B]UK[/B] – After a disappointing week of poorly performing releases the docket for the UK economy sees little significant event risk. Predictably, Nationwide House Prices and Mortgage Approvals are expected to decline further as the UK continues to experience a profound housing slump. GfK Consumer Confidence will likely follow suit as deteriorating conditions will have Britons tightening their belts. July’s Manufacturing PMI is expected to sink deeper below the 50 “boom-bust” level to register at 45.5 as the economic downturn crimps demand both domestically and globally.
[B]Australia [/B]– Building Approvals may surprise to the upside, following an improvement in new home sales driven by record immigration attracted to Australia’s mining boom. Forecasts cal for an annualized decline of -4.1%. The Trade Balance too may see improvement as the deficit is expected to contract to –A$100 million in June versus –A$965 million in the preceding period. May’s reading was heavily skewed by a 17% rise in fuel imports as oil prices continued to soar. Imports may have eased a bit in June as consumers take stock of deteriorating economic conditions and pare back on expenses. Indeed, Westpac’s measure of consumer confidence dropped -5.7% in June versus 2.7% in May. While this likely spells improvement for the trade deficit, it will mean decline for June’s Retail Sales result: the headline figure is to print flat at 0.0% having grown 0.7% in May.
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To contact Ilya and Luis regarding this or other articles they have authored, please email them at <[email protected]>[/I]