The British pound is lower against the Australian dollar on Tuesday afternoon after data showing accelerating house price growth in Australia reduced expectations for further interest rate cuts. The losses in Sterling were limited by an upside surprise in UK GDP data.
GBP/AUD was down by 33 pips (-0.17%) to 1.9281 with a daily price range of 1.9211 to 1.9326 as of 2.30pm GMT. The currency pair slid nearly 80 pips in Asian trading hours before recouping almost all the gains then falling back again at the 1.93 level. The daily losses take the weekly move into negative territory of -0.17%.
AUD high thanks to strong month in housing finance
News was mixed out of Australia and the coronavirus now having claimed 1000 lives with 42,700 cases was bad news for the Asia-Pacific region. Nonetheless, the Aussie dollar was in demand, with short covering near decade lows versus the dollar helping the positive momentum. Focus was put on housing data which showed the strongest month for growth in housing finance by Australian owner-occupiers since 2015. In the minds of policymakers at the Reserve Bank of Australia, excessive loan demand is a risk-factor when deciding whether to lower interest rates even further.
GBP lower due to negative effects of December election
Fourth-quarter GDP growth ahead of expectations helped the British pound further recover from last week’s steep losses. Expectations had been for a -0.3% monthly fall in UK GDP with economists having seemingly put too much emphasis on any negative effect of the unusual December general election. The economy in fact added +0.3% in December meaning that annual growth was 1.1% year-over-year, on par with the 1.2% in the third quarter and avoiding the sub 1% numbers expected.
The trade-off for the British pound has been the generally better-than-forecast economic data set against the economic uncertainty surrounding the UK/EU trade deal. Later today, outgoing Governor of the Bank of England Mark Carney will make remarks to parliament. In the past, much to the rebuke of many ‘Leave’ voters has been very outspoken about the potential economic damage from Brexit. New information on the government’s approach to trade with the EU might be a topic for discussion.