Yesterday saw the GBP AUD exchange rate trending largely flatly, as solid risk-sentiment kept the ‘Aussie’ buoyed. The pair recovered from its worst levels due to UK public borrowing data.
The Pound to Australian Dollar exchange rate plunged from 1.6472 to 1.6230 last week. On Monday the pair continued to trend near the week’s opening levels.
Pound (GBP) Outlook Depends on UK Growth Results
Sterling saw a limited boost in demand this morning, as investors digested a better-than-forecast UK public sector net borrowing report from July.
Public borrowing was forecast to come in at around £0.2b, but instead improved from £-5.67 to £0.76.
This was the first July surplus in over a decade, since 2002 and was largely due to tax receipts, which most analysts expected would improve the borrowing figure this month.
However, borrowing is still up £22.8b year-on-year, up 9% from the same period last year.
Overall, the report was unable to give the Pound a notable, lasting boost of support. Instead, it merely helped the GBP AUD exchange rate to hold its ground opening levels rather than falling further.
Investors are unlikely to make any big moves on Sterling until Thursday’s key British data has been published.
Thursday will see the publication of Britain’s second Q2 Gross Domestic Product (GDP) projections.
These are expected to meet the first projections and come in at 1.7% year-on-year and 0.3% quarter-on-quarter. If they fall short of expectations, the Pound outlook will worsen and GBP AUD will fall.
On the other hand, if they beat expectations it would indicate that Britain’s economic performance has been more resilient than expected, which would bolster Pound demand.
Britain’s Q2 business investment projections could also impact Pound exchange rate movement, as it could indicate how businesses are coping with the Brexit process.
Overall, if this week’s UK data impresses it would show the resilience of Britain’s economy and make the long-term Pound exchange rate more appealing.
Australian Dollar (AUD) Investors Await Jackson Hole News
The Australian Dollar saw a surge in demand last week, as the US Dollar (USD) weakened and risk-correlated currencies became more appealing in markets.
Amid a lack of strong US data and low bets that the Federal Reserve will hike US interest rates again before 2018, investors bought the risky Australian Dollar to make their yields.
Despite the Reserve Bank of Australia’s (RBA) recent warnings on the value of the ‘Aussie’, the currency has seen strong performance lately.
July’s Australian labour market results were impressive too, keeping the Australian Dollar appealing.
However, ‘Aussie’ movement since Monday has been limited as investors anticipated the upcoming monetary policy symposium at Jackson Hole.
Federal Reserve officials are expected to speak at the event and their comments could have a major effect on Fed rate hike bets.
If Fed rate hike bets improve, the Australian Dollar will weaken as the US Dollar strengthens. The opposite is also true, a more cautious Fed outlook would cause GBP AUD to fall further.
The week’s Australian economic calendar is quiet and as a result the ‘Aussie’ is unlikely to be inspired by domestic news until next week’s housing data comes in.
GBP AUD Interbank Rate
At the time of writing this article, the GBP AUD exchange rate trended in the region of 1.6223. The Australian Dollar to Pound exchange rate traded at around 0.6162.
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