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GBP to AUD Exchange Rate Slips as Investors Anticipate Australian Confidence Data

February 12, 2018 - Written by James Fuller

As Brexit uncertainties and disagreements between the UK and EU weigh on Sterling, the British Pound to Australian Dollar (GBP/AUD) exchange rate slipped on Monday. The Australian Dollar benefitted from higher risk-sentiment and market anticipation for upcoming Australian ecostats.

Despite a lack of supportive Australian data in recent sessions, GBP/AUD tumbled from 1.7807 to 1.7687 last week. The pair is still relatively close to its best levels in over a year however. Last Thursday GBP/AUD briefly touched on a post-Brexit vote high of 1.7979.

GBP Fails to Benefit from Bank of England (BoE) Hints

Last week, the Bank of England (BoE) held its anticipated February policy decision. As was hinted by BoE Governor Mark Carney near the beginning of February, the bank indicated it may need to tackle UK inflation and hike UK interest rates soon.

With the bank indicating that UK interest rates could rise at a faster pace than the bank predicted in 2017, analysts forecast that the bank could be planning to hike UK interest rates again as soon as May 2018.

However, BoE officials have noted that its more hawkish outlook largely depends on the UK government’s ability to secure a respectable post-Brexit deal with the EU, including a transitional period.

Bank of England policymakers may not need much persuasion besides hopes of a smooth Brexit process either. According to David Cheetham, chief market analyst from XTB;

‘MPC voting member Gertjan Vlieghe has been speaking this morning on a panel discussing household debt in London and remarks such as “there is increased evidence that tighter labour markets are beginning to have upwards effect on wages” and that “if there is less credit headwind to the UK economy then we maybe ready for rate hikes” are certainly erring on the side of being hawkish. The comments are even more noteworthy given that Mr Vlieghe is deemed one of the most dovish voting members.’

As investors remain concerned about potential disagreements between the UK and EU on the terms of a post-Brexit transition period and many other Brexit uncertainties remain, the Pound remained limp on Monday and has been unable to benefit from BoE hawkishness.

AUD Benefits from Equity Market Recovery

Despite a lack of notable Australian ecostats in recent sessions, the Australian Dollar has sustained gains against a weaker Pound. This has been largely due to global market news.

Last week saw a brief but sharp selloff in equity markets across the globe as stocks corrected following months of strong gains.

As the selloff spooked investors, risky investments became unappealing and traders sought ‘safe haven’ assets like the US Dollar (USD) instead.

However, towards the end of the week markets calmed. As investors returned to stocks, risk-sentiment rose and the Australian Dollar strengthened again.

A stronger Chinese stock market has boosted the Australian Dollar further too. As Australia is China’s biggest trade partner, signs of strength in China’s economy often supports AUD trade.

GBP/AUD Forecast: Australian Confidence and Job Market Stats in Focus

While the Pound to Australian Dollar exchange rate is currently trending largely on Brexit uncertainties and risk-sentiment, investors are likely to pay more attention to data in the coming days.

Many key Australian ecostats will be published this week which have the potential to drive movement in the Australian Dollar.

Tuesday’s Asian session will see the publication of NAB’s Australian business confidence report from January, followed by Westpac’s February consumer confidence survey on Wednesday.

The most influential data this week for GBP/AUD investors though, is likely to be Thursday’s Australian job market report from January.

Signs that Australia’s job market remains strong in 2018 could boost demand for the ‘Aussie’ towards the end of the week.

As for Sterling, Tuesday’s UK Consumer Price Index (CPI) report and Friday’s retail sales stats are typically influential. However, with the Bank of England (BoE) concerned about the uncertainty of how the Brexit process will end, Brexit news is more likely to drive the Pound.
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