GBP/AUD Forecast: Pound to Australian Dollar Exchange Rate Under Pressure as RBA Maintains Course

March 2, 2021 - Written by Frank Davies

STORY LINK GBP/AUD Forecast: Pound to Australian Dollar Exchange Rate Under Pressure as RBA Maintains Course

Pound (GBP) Exchange Rates Supported by Surprise UK Housing Price Index Uptick

A stronger-than-expected month for the Nationwide housing prices index was not enough to keep the Pound to Australian Dollar exchange rate from trending lower.

While prices defied forecasts of a fresh contraction to instead rebound 0.7% on the month this failed to offer the Pound any real boost against its rivals.

Although this stronger showing suggests that the UK housing market held up last month, potentially benefitting from a surge in activity ahead of the end of the stamp duty holiday, the mood towards the Pound remained muted.

Investors were more concerned by the revelation that German exports to the UK had fallen 30% in January, highlighting the first impact of the change in trade conditions post-Brexit.

Evidence of the increasing trade pressures likely to come to bear on the UK economy in the months ahead left GBP exchange rates on the back foot.

Australian Dollar (AUD) Exchange Rates Trend Higher in Spite of Steady RBA

It came as little surprise to markets that the Reserve Bank of Australia (RBA) opted to leave interest rates on hold at its March policy meeting.

With the central bank looking set to keep interest rates on hold for the foreseeable future, still targeting a potential 2024 rate hike, support for the Australian Dollar proved limited in the wake of the announcement.

However, as the general sense of market risk appetite showed signs of picking up once again AUD exchange rates saw little downside on Tuesday.

As the fourth quarter current account surplus widened further than forecast this helped to improve confidence in the underlying performance of the Australian economy.

While it remains to be seen whether this performance carried through into the first quarter of 2021 investors still took encouragement from this data, lifting the Australian Dollar higher across the board.

GBP/AUD Exchange Rate Forecast: Softer Australian Growth to Offer Rallying Point

Even so, the Pound to Australian Dollar exchange rate could find some renewed support on Wednesday with the release of the fourth quarter Australian gross domestic product report.

With forecasts pointing towards another sharp contraction in growth on the year, as well as a quarterly loss of momentum, this could see the Australian Dollar come under pressure.

Unless the growth data highlights a degree of resilience within the Australian economy AUD exchange rates look vulnerable to renewed selling pressure.

Any signs of dovishness on show with the release of the RBA’s economic chart pack could also help to rally the GBP/AUD exchange rate at this stage.

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TAGS: Pound Australian Dollar Forecasts