The Australian Dollar had another good week last week with a collection of strong data confirming the Aussies healthy position against powerhouse currencies, like the Pound and the Dollar.

Key data releases included the producer price index which grew by 1.9% for the first quarter, with a year on year growth of 4.8%. Wednesday saw Consumer Price Index (a key inflation forecast) estimate at 1.3% for the first Quarter and annualised at 4.2% making inflation the highest level in 17 years. With interest rates at a 12 year high the market has adjusted its forecast and is now expecting a sustained period of unchanged interest rates in Australia.

Carry trades also played an important part last week with improvement in global risk appetite earlier in the week resulting in the Aussie Dollar reaching a record high against the US Dollar. However, by the end of the week the Aussie Dollar had retreated slightly as carry trades experienced some profit taking and overall the US Dollar strengthened.

The short and the long term view of GBP/AUD remains unchanged with the Aussie expected to continue to make gains against the pound. Buoyant commodity prices and growth in carry trades are expected to continue to support the Australian Dollar whilst Sterling continues to struggle with the fall out of the credit crisis posting very poor housing figures and expected interest rate cuts.