Australian dollar holds its ground against the pound

The Australian dollar held its ground against sterling yesterday, as the high yielding aussie continues to benefit from an upturn in investor risk appetite.

• Optimism over the financial sector was given a boost as rumours that the institution managing the UK government’s stake in banking giants Lloyds and Royal Bank of Scotland were sounding out investors for a possible sell off.
  
• However, data out yesterday reminded markets that the UK economy was still in a bad way, with consumer price index inflation rising by only 0.2 percent for the month, bringing the annual rate of inflation down to 2.3 percent, from 2.9 percent in March.
  
• Although currency markets are backing sterling to outperform the US dollar and the euro going forward, any rebound against the aussie may take slightly longer.
  
• The Australian economy is in a much better position to recover from the world recession, as it has the highest yield in the developed world and a recovery in world growth would only support its commodity based exports.