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Pound Australian Dollar (GBP/AUD) Exchange Rate Recovers Ground on Solid UK Labour Market Data

June 11, 2019 - Written by Frank Davies

Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Strengths as UK Unemployment Maintains 44-Year Low

A steady showing from April’s UK unemployment rate helped the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate recover further ground on Tuesday.

As unemployment remained at a 44-year low of 3.8% this gave investors fresh cause for confidence in the UK economy, in spite of lingering concerns over Brexit.

Although wage growth showed some signs of faltering in the face of rising inflationary pressure this was not enough to prevent the Pound trending higher.

With markets hopeful that the Bank of England (BoE) is still on track to raise interest rates before the end of the year demand for the Pound naturally improved.

Stronger Business Confidence Shored up Australian Dollar (AUD) Support

While the NAB business confidence index showed a strong improvement in May this was not enough to shore up the Australian Dollar, meanwhile.

Although the uptick suggests that the economy could see greater strength in the months ahead a resurgence in market risk aversion put AUD exchange rates under fresh pressure.

As the Trump administration threatened China with the imposition of further tariffs the appeal of the risk-sensitive Australian Dollar diminished.

With markets already concerned by the global trade outlook the threat of a further escalation in the US-China trade dispute left AUD exchange rates on the back foot.

Improved Consumer Confidence to Offer Australian Dollar (AUD) Exchange Rate Boost

The appeal of the Australian Dollar could recover on Wednesday, though, if the Westpac consumer confidence index shows a similar improvement on the month.

Evidence that consumer and business sentiment are both improving would bode well for the economic outlook, reducing the likelihood of another Reserve Bank of Australia (RBA) interest rate cut.

The GBP/AUD exchange rate could also come under pressure on the back of May’s Chinese consumer price index data, with forecasts pointing towards an uptick in inflationary pressure.

As long as signs suggest a greater level of resilience within the Chinese economy demand for the Australian Dollar looks set to pick up.

Political Developments Set to Dominate GBP Exchange Rate Outlook

Speculation surrounding the Conservative leadership contest may keep the Pound under pressure in the coming days, on the other hand.

With the odds continuing to favour a hard-line Brexiteer as Theresa May’s most likely successor the threat of a no-deal Brexit still hangs over the economic outlook.

Unless candidates favouring a softer approach towards Brexit show signs of gaining support any GBP exchange rate support is likely to prove limited.

Thursday’s RICS house price balance reading may also provoke volatility for the GBP/AUD exchange rate, with investors anticipating another month of weakening prices.
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