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GBP/AUD Forecast: Pound to Australian Dollar Exchange Rate Gains Ground Ahead of BoE Meeting

May 4, 2021 - Written by Frank Davies

Pound (GBP) Exchange Rates Benefits from Improved UK Manufacturing PMI

The Pound to Australian Dollar (GBP/AUD) exchange rate found some support on Tuesday thanks to an upwardly revised UK manufacturing PMI.

As the finalised April manufacturing PMI saw a slightly better performance than initially forecast, clocking in at 60.9, this helped to encourage confidence in the second quarter outlook.

With the manufacturing sector having demonstrated solid growth at the start of the second quarter investors saw greater cause for optimism in the wider economic outlook, helping to boost the appeal of the Pound.

However, the upside potential of GBP exchange rates was ultimately limited thanks to a disappointing mortgage approvals figure.

A surprise monthly dip in mortgage approvals growth put some pressure on the Pound, with confidence in the resilience of the UK housing market dented.

Australian Dollar (AUD) Exchange Rates Soften as Reserve Bank of Australia Leaves Policy Unchanged

The Australian Dollar found itself on a largely softer footing in the wake of the Reserve Bank of Australia’s (RBA) May policy meeting.

As the central bank opted to keep monetary policy on hold, signalling no imminent change in outlook, this left AUD exchange rates under a degree of pressure.

While the RBA expressed a degree of optimism in the economic outlook this was not enough to give the Australian Dollar any boost against its rivals at this stage.

A surprise narrowing of March’s trade surplus added to the weakness of AUD exchange rates, with signs pointing towards a deterioration in trade conditions.

A sharper monthly decline in export volumes put particular pressure on the Australian Dollar on Tuesday morning.

GBP/AUD Exchange Rate Forecast: Weakness Likely Ahead of Bank of England Policy Decision

The Pound to Australian Dollar exchange rate looks set to come under increased pressure as anticipation for the Bank of England’s (BoE) policy announcement grows.

With policymakers expected to maintain their dovish outlook on Thursday the mood towards the Pound could sour once again.

As long as the BoE shows no willingness to consider tightening monetary policy in the coming months the potential for GBP exchange rate gains looks set to diminish.

With key hawk Andy Haldane set to depart the central bank the Pound could weaken in response to a fresh affirmation of dovishness from his colleagues.

Support for the Australian Dollar, meanwhile, could pick up on the back of April’s finalised services PMI.

Evidence of sustained growth within the service sector may encourage investors to bet on the prospect of the Australian economy continuing to perform well over the course of the second quarter.
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