GBP/AUD Outlook: Pound Australian Dollar Pushes Higher as Markets Await UK Budget

March 3, 2021 - Written by John Cameron

STORY LINK GBP/AUD Outlook: Pound Australian Dollar Pushes Higher as Markets Await UK Budget

The Pound to Australian Dollar exchange rate headed higher this morning as markets eagerly await the announcement of the UK Spring Budget for 2021.

At the time of writing the pair are currently trading at around AU$1.7881.

Pound (GBP) Supported by Extended UK Furlough Scheme

The Pound found itself supported this morning after the announcement of an extension of the furlough scheme in the UK until September, as investors await the UK budget this afternoon.

Announcing the support, Chancellor Rishi Sunak said:

‘There's now light at the end of the tunnel with a roadmap for reopening, so it's only right that we continue to help business and individuals through the challenging months ahead - and beyond.’

The Pound was further supported by the IHS Markit UK Services PMI for February.

The UK Services PMI came in at 49.5 in February 2021 compared with January's eight-month low of 39.5.

Tim Moore, Economics Director at IHS Markit commented on the data, saying:

‘UK service sector activity was relatively stable in February and so it appears that the third national lockdown has seen limited spill overs to parts of the economy beyond the scope of government mandated closures.’

‘There were signs of growth in technology and some business services after a disappointing start to 2021.’

Australian Dollar (AUD) Falls Against the Pound Despite Positive GDP

Although the Australian Dollar is down against the Pound this morning, the currency has found its losses limited as a positive GDP Q4 reading from Australia and global risk-on mood pushes AUD higher against the US Dollar.

The Australian Dollar climbed after Australian Q4 GDP came in at 3.1% (QoQ) beating forecasts of 2.2%.

Marcel Thieliant, economist at Capital Economics, was optimistic surrounding the GDP release, commenting on the data he said:

‘We reiterate our above consensus forecast for GDP growth of 4.5 per cent this year . . . which implies that allowing for the slump in net migration due to the closure of the border, the economy will suffer no permanent drop in output as a result of the pandemic.’

Furthermore, the Australian Dollar has also been bolstered by a sharp rise in commodity prices, which rose 4.7% in Q4.

GBP/AUD Exchange Rate Forecast: Chancellor Rishi Sunak Budget in Focus

Pound investors of course will be looking towards this afternoon’s Spring Budget announcement from Rishi Sunak, with more support for the UK’s economy from the Chancellor pushing Sterling higher.

Australian Dollar traders will be looking towards Australian retail sales figures released tomorrow, figures are forecast to have grown to 0.6%, up from -4.1% the previous month, which could add increased support for the ‘Aussie.’

The GBP/AUD exchange rate will also be moved by any further coronavirus developments, with global cases of the virus falling investors could be more optimistic and buy into the risk-correlated Australian Dollar.

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TAGS: Pound Australian Dollar Forecasts