Predictions for the British Pound / Australian Dollar Exchange Rate Over Next Week

August 27, 2017 - Written by John Cameron

STORY LINK Predictions for the British Pound / Australian Dollar Exchange Rate Over Next Week

The Pound to Australian Dollar exchange rate is currently valued at AUS$1.62366 on Sunday 27th August, as markets prepare to open for the new trading week.

The Aussie converts at £0.61589 in British pounds.

GBP/AUD barely moved last week as a lull in data caused both currencies to face increased pressure from external influences.

British Pound (GBP) Fails to Hold on to Gains on Mixed GDP Report

While the Pound trended higher against the Australian Dollar at the very start of this week’s session it struggled to maintain its gains in the face of further Brexit uncertainty, with growing concerns that the UK’s trade talks with the EU may be delayed.

This volatility persisted into the second half of the week as well as the UK released its latest GDP figures, with the Pound initially rising as the Office of National Statistics (ONS) reported that UK economic growth rose in the second quarter.

However with growth only rising to 0.3% the UK remained the slowest growing G7 economy with a closer look at the accompanying Business investment figures also showing that investment remained flat between April and June, prompting further doubts over Britain’s future growth potential, especially in the face of Brexit.

Lee Hopley, chief economist at manufacturers’ organisation EEF said, ’Today’s GDP revisions tell a familiar story for the UK economy for the first half of this year. We’ve got weaker growth – relative to both our performance in the past couple of years and increasingly our developed world counterparts. The most recent three months growth has been almost entirely reliant on spending by households and government, and depending too much on the former looks risky given the continuing squeeze on real incomes.’

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‘Another quarter passes without any sustained positive contribution from either net trade or business investment, which doesn’t feel like the most stable of foundations for a post-Brexit economy.’

The rapid reversal of Sterling fortunes on Thursday was also driven by the release of the Confederation of British Industry’s (CBI) latest retail data as its distributive trades index plummeted from 22 to -10, falling well below the expected drop to 15.

The CBI attributed the contraction to the pressures of higher inflation on consumer spending, and while it predicted that sales growth is likely to recover, it suggested that it would likely be at a more modest pace as household finances continue to deteriorate.

A Directionless Australian Dollar (AUD) Last Week

A total lack of Australian Data this week left the Australia Dollar a little directionless this week, with most of its momentum driven by commodity prices and market risk appetite.

Fortunately for the ‘Aussie’ commodity prices moved broadly higher at the start of this week’s session, particularly for the key Australian exports of iron ore and coking coal, which were both lifted this week as on speculation that Chinese steel production its soon likely to rise.

However prices began to recede again in the second half of the week as the China Iron & Steel Association (CISA) warned about a curb in steel production during the winter months.

Meanwhile the Australian Dollar faced further volatility towards the end of the week as markets became increasingly cautious ahead of the central bank summit at Jackson Hole especially in regards to the speech by Federal Reserve Chair Janet Yellen.

Craig Erlam, senior market analyst at Oanda, said, ‘It will be interesting to see whether Yellen will address this today or instead focus on balance sheet reduction, which is expected to be announced in September.’

GBP AUD Exchange Rate Forecast: Further Sterling Weakness Ahead?

Looking ahead the GBP AUD exchange rate may trend lower at the start of next week as the combination of a lull in domestic data and thin trading volumes over the bank holiday weekend leaves the Pound with little to drive it higher.

Meanwhile the Australian Dollar may strengthen on Wednesday as Australia releases its latest construction figures, with economists forecasting that activity in the building sector will have risen again in the second quarter after declining 0.7% at the start of the year.

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