The GBP/AUD pair is not a major currency pair, but is a currency cross of the British Pound and the Australian Dollar. Both are two of the most widely traded currencies across the global, which means that liquidity, or the amount of investors buying and selling the GBP/AUD, is fairly strong.
As such, the average spread retail traders typically pay on trading one standard lot GBP/AUD is 3.9-4.3-pips, and this spread is lowest during two separate times during the day: when Asia is open, from 23:00 GMT to 02:00 GMT; and when Europe is open, from 03:00 GMT to 16:00 GMT.
When the Australian and British markets are offline, trading of the GBP/AUD thins out, and spreads typically rise from 17:00 GMT to 22:00 GMT.
Factors Influencing the GBPAUD Pair
Like any other currency pair, the most important factors that determine the GBP/AUD’s price are the local interest rates in each economy. The Bank of England decides the U.K. interest rates typically on the first Thursday of every month. The Reserve Bank of Australia also meets during the first week of every month. A decision to cut interest rates or increase accommodative monetary measures has historically been negative for the local currency.
For example, if the Bank of England decides to cut interest rates, the GBP/AUD is likely to depreciate; if the Reserve Bank of Australia decides to cut interest rates, the GBP/AUD is likely to appreciate.
The basis for the monetary policy decisions and therefore also an important factor for the pair’s price is each economy’s output, or gross domestic product (GDP). Inflation levels are also important factors for the central banks when making rate decisions and consumer price Index (CPI) results will therefore strongly affect trading.
Major Chinese data also plays a role, considering that China is Australia’s largest trading partner. Mainly, this comes in the form of base metals export as well as other commodities, which China needs to fuel its rapid, but slowing growth.
Additionally, other releases that affect trading are indicators that tell of the health of the economy. Higher retail sales and a low unemployment rate, mean a strong economy. The U.K. Production Managers’ Index will indicate future GDP reports. The producer price index will also give clues to inflation changes, but are not as definitive as the CPI. Australian Current Account and Trade Balance data tend to influence the GBP/AUD as gauges of Chinese growth prospects.
Analyzing GBP/AUD Charts
While neither country uses the Euro, both are major trading partners to the Euro-zone. The Sterling is considered a safe haven currency when compared to the Australian, but will trade as a risky currency when compared to other safe havens like the U.S. Dollar or the Yen.
The Australian Dollar has traded exclusively as a risky currency, and is also greatly influenced by emerging markets. Therefore, bad news out of China and the Euro-zone tend to benefit the GBP/AUD, while news of strong global growth or easing of the Euro-zone crisis tend to hurt the GBP/AUD.
On the GBP/AUD weekly chart, it is clear that the pair has been trading mostly lower to sideways for the past two years, as the exuberance for global growth has been tempered by financial worries rooted in Europe. As explained earlier, this has led to dramatic swings in the pair. With prices moving higher off of the lows established in February and August of 2012, prices seem supported if only marginally through the beginning of 2013.
Given the descending channel that is in place, and the trendline off of the lows, price should be near 1.5175 on March 1, with an expected range of 1.4890 to 1.5460. If the Euro-zone crisis eases substantially, and Chinese growth concerns dissipate, it is possible to see the GBP/AUD shift lower towards 1.4350.
Trading GBPAUD – Summary
- Typical Spreads on GBPAUD: 3.9 – 4.3 Pips (During trading hours)
- Most active: Asian Session (23:00 GMT to 02:00 GMT)/London Session (03:00 GMT to 16:00 GMT)
- Widening Spreads between: 17:00 GMT to 22:00 GMT
- Preferred Brokers: FXCC (1 – 3 Pips) | Pepperstone (1.2 – 5 pips1/0.3 – 4 pips2) | LMAX Exchange (0.5-3 Pips)
1Pepperstone Standard Account
2Pepperstone Razor Account