Pound to Australian Dollar Rate Under Pressure as Australian Capital Expenditure Recovers

February 25, 2021 - Written by Frank Davies

STORY LINK Pound to Australian Dollar Rate Under Pressure as Australian Capital Expenditure Recovers

GBP/AUD Exchange Rate Sheds Ground as Covid-19 Vaccine Optimism Fades

In the absence of any fresh UK economic data releases there was little to prevent the Pound to Australian Dollar (GBP/AUD) exchange rate from faltering.

As the impact of earlier market optimism over the prospect of a second quarter UK economic recovery faded this left the Pound on the back foot against many of its rivals.

GBP exchange rates enjoyed a strong bullish run over the course of the previous week, capitalising on the relative success of the country’s Covid-19 vaccine rollout.

Without the support of fresh economic developments, though, the Pound was left vulnerable to a market correction on Thursday.

Australian Dollar (AUD) Exchange Rates Benefit from Rebound in Private Capital Expenditure

Support for the Australian Dollar increased in the wake of the fourth quarter private capital expenditure reading.

While forecasts had pointed towards expenditure stabilising on the quarter, delivering a flat result, investors were caught off guard by a sharp surge of 3%.

This uptick helped to limit some of the impact of the previous month’s decline, suggesting that Australian businesses started to recover some of their lost confidence at the end of the year.

Stronger levels of business investment bode well for the strength of the wider economy, increasing the odds of Australia experiencing a stronger bout of growth in the first quarter of 2021.

Even so, ahead of the release of the latest US jobless claims and durable goods orders figures AUD exchange rates still looked vulnerable to any deterioration in market risk appetite.

GBP/AUD Forecast for Volatility on UK Housing Price Index

Fresh volatility could be in store for the Pound to Australian Dollar exchange rate on Friday with the release of the latest UK Nationwide housing prices index.

As resilient growth in UK house prices and a steady housing market have previously helped to shore up the Pound, as well as supporting the wider economy, a positive showing here could boost GBP exchange rates.

Evidence that demand for housing continued to grow in February, in spite of the ongoing national lockdown, could see the mood towards the Pound widely improve.

On the other hand, with forecasts pointing towards another sharp decline in car production on the year for January the potential for fresh GBP/AUD exchange rate weakness remains.

Unless the manufacturing sector can demonstrate signs of holding up, even in the face of growing disruption at the UK borders, support for the Pound looks set to weaken further heading into the weekend.

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TAGS: Pound Australian Dollar Forecasts