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GBP to AUD Exchange Rate Sees Friday Slide despite Disappointing Australian PMI Results

August 21, 2020 - Written by James Fuller

Despite Friday’s strong UK data and mixed Australian data, the British Pound to Australian Dollar (GBP/AUD) exchange rate fell back from the week’s highest levels on Friday. The Pound outlook remains pressured by various factors like coronavirus and Brexit uncertainties, while the Australian Dollar remains generally appealing due to global central bank liquidity and coronavirus vaccine hopes.

After opening this week at the level of 1.8244, GBP/AUD briefly saw mixed movement. At the beginning of the week, GBP/AUD touched on an August low of 1.8141, but towards the end of the week the pair trended with an upside bias.

This morning, GBP/AUD even touched on a high of 1.8404 - the best level for the pair for over two months, since June. Since that high however, GBP/AUD has been tumbling with investors hesitant to hold the pressured Pound near its best levels.

GBP Exchange Rates Tumble despite Impressive UK PMI Results

While the Pound has seen relatively bullish movement this week so far, today’s stronger than expected UK data has not done enough to help the Pound to hold its best levels.

Britain’s key July retail sales and August PMI projections all came in well above forecasts. The figures alone were so impressive that they indicated Britain could have seen more of a v-shaped recovery from the coronavirus pandemic.

Britain’s key services PMI even printed at 60.1, well above the forecast 57. The overall composite PMI printed at 60.3 rather than the forecast 57.1.

However, analysts were quick to point out that the details of the report hid great uncertainty and concern, especially for Britain’s job market.

According to Tim Moore, Economics Director at IHS Markit:

‘Private sector firms reported another sharp fall in employment numbers as scarring from the pandemic and lingering doubts about the sustainability of recovery resulted in a need to cut overheads. The rate of job shedding accelerated since July, with survey respondents frequently noting that redundancy programmes had been running in tandem with efforts to return some staff from furlough’

On top of the downsides to this UK data, the Pound was weighed by news that Britain’s national debt had risen over 2trillion. A lack of developments in UK-EU Brexit negotiations this week are also keeping the Pound from its highs.

AUD Exchange Rates Remain Appealing despite Weakness in Australian Data

Australia’s own August PMI projections, from CommBank, were published today. Unlike Britain’s PMIs, Australia’s largely fell short of forecasts.

As Australia’s State of Victoria has seen fresh coronavirus lockdown in recent months, hopes for continued strong economic performance have weakened. Analysts expect it will show in Australian data.

However despite this, the Australian Dollar was rebounding from its worst levels against Sterling today.

What’s more, analysts believe that due to the overall global tone of central banks and continued hopes for progress in a coronavirus vaccine, risk-sentiment is likely to keep buoying the Australian Dollar. According to Analysts at Westpac:

‘Other factors which are likely to continue to support AUD are the likely ongoing boosts to risk – firm commitments by central banks to support liquidity and demand; ongoing government stimulus; improving news around developments with vaccines; and Australia’s ongoing current account surplus which we expect to register at $46 billion for 2020 including $10 billion for the December quarter.’

GBP/AUD Exchange Rate Forecast: Coronavirus and Brexit in Focus amid Quiet Data Week

Pound to Australian Dollar exchange rate investors won’t have much data to react to in the coming week, amid a quiet week for UK and Australian eco calendars.

The Confederation of British Industry (CBI) will publish its August distributive trades data on Tuesday. UK car production results will be published on Thursday.

As for the week’s Australian data, construction stats will be published during Wednesday’s Asian session, followed by private capital expenditure data on Thursday.

With none of these stats expected to be particularly influential, the Pound to Australian Dollar will be driven more by global coronavirus and political developments.

If ‘second wave’ coronavirus fears worsen, markets could see shifts in risk-sentiment.

On the other hand, if no-deal Brexit fears worsen as investors digest a lack of progress in negotiations, the Pound may have an even harder time holding its recent advance attempts.

The Australian Dollar could see stronger demand if Australia’s coronavirus situation continues to calm.

The Pound to Australian Dollar exchange rate could also be influenced by Friday comments from Bank of England (BoE) Governor Andrew Bailey.
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