Alert: Pound Sterling to Australian Dollar Exchange Rate (GBP/AUD) Under Significant Pressure on Friday

By Rob Samson

The Australian dollar (AUD) has surged higher against the Pound Sterling potentially bringing an end to the lathers period of dominance.

A look at the forex markets on Friday afternoon shows the pound sterling to Australian dollar exchange rate (GBP/AUD) is trading 0.8 pct down on last night's closing rate. GBP/AUD is at 1.8367.

(Please note all GBP/AUD quotes are taken from the spot markets; your bank will subtract a discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer and deliver you up to 5% more currency. Please learn more here.)

The Aus dollar has been boosted by today's weak U.S. payrolls data and the resulting pullback in U.S. yields.

Earlier in the day data showing a very strong 8.3% (y/y) rise in Chinese imports helped lift the Australian currency.

"Any rise in Chinese imports suggests an improving domestic economy which should keep demand for Australia’s exports elevated," says Omer Esiner at Commonwealth Foreign Exchange.

Sterling experienced choppy trading against the Australian dollar yesterday as investors speculated about the Bank of England’s policy decision.

The British central bank kept interest rates and asset purchases unchanged, as expected.

"However, they didn’t offer an accompanying statement to update forward guidance. Investors will now have to wait for the meeting minutes in two weeks’ time to discover whether the MPC considered changing forward guidance," says Sasha Nugent at Caxton FX.

The pound is falling against the Aussie dollar so far this morning, after British manufacturing production figures were worse-than-expected; the data came in at 0.0%, against a forecast reading of 0.4%.

Longer term outlook remains negative for the Australian dollar

For the headline AUD/USD exchange rate the long-term technical pattern remains negative and this should support the GBP against the AUD.

"A decisive break under 0.8848 (05/08/2013 low) would open the way for a move towards the key support at 0.8067 (25/05/2010
low). A significant resistance is given by the 200 day moving average (around 0.9400)," says Luc Luyet at MIG Bank.

ICN Financial agree however warn that the Australian dollar could expect a rebound:

"The pair touched levels around 0.8888, above our entry for the bullish scenario, which is at 0.8885, before bouncing slightly. We expect a possible rebound in the context of the clear sideways market, as price approached the bottom of the range, where holding above 0.8840 area should keep this scenario valid."

We would expect the recent rally in sterling to come to an end. However, the dip should be shallow as we would expect the broader trends of US tapering and UK economic outperformance to reassert themselves eventually.