While the past week has lacked influential Australian data, UK data has given traders a more detailed picture of what UK growth could do in 2017.
This has caused the Pound to Australian Dollar exchange rate to fluctuate near the level of 1.62 for most of the week.
Britain’s preliminary Q4 Gross Domestic Product (GDP) report was the most influential ecostat for GBP AUD this week. The quarter-on-quarter result impressed, rising from 0.6% to 0.7%.
However, news that the fourth quarter’s yearly rate was revised down from 2.2% to 2% concerned GBP traders.
The report also confirmed that Britain was no longer the fastest growing major economy of 2016. The nation’s 2016 growth figure was revised down from 2% to 1.8%.
Reduced business investment and a slowing retail sector were among the reasons for the lower-than-predicted growth stats. Falling business investment led analysts to predict that wage growth could also continue worsening.
The report increased concerns that as UK consumer prices continue climbing and wage growth keeps slowing, the key retail sector will see significantly less activity throughout 2017.
This could cause a long-term drop in GBP/AUD value, especially if the Australian economic outlook remains comparatively solid.
This week’s Reserve Bank of Australia (RBA) meeting minutes were neutral but fairly optimistic about Australia’s economic outlook.
If economic factors in Australia continue to improve at a steady pace, the RBA may even hint towards tightening monetary policy in the long-term.
While the Australian Dollar’s recent bullish charge appeared to run out of steam this week and the currency is seeing increasingly little correlation with the ever-strong price of iron ore, the ‘Aussie’ has held GBP/AUD near its lowest levels.
However, one global factor remains a threat to the long-term value of the Australian Dollar – US interest rates.
If the Federal Reserve hikes US interest rates multiple times throughout 2017, the Australian Dollar (and other higher-risk currencies) are likely to lose significant ground.
Next week’s data could alter the long-term forecast for GBP AUD, as it will see the publication of Britain’s February PMIs from Markit.
If they beat expectations, it could increase hopes that Britain’s economic activity will remain strong at least a little longer despite drops in retail activity in late 2016 and January 2017.
Australia will also see a busy economic calendar next week. Key figures, including the Q4 GDP results for the nation as well as January’s trade balance data, will be published.
If Australia’s Q4 growth results beat expectations, this could cause an increase in hopes of RBA monetary policy tightening in the foreseeable future.
Underwhelming UK PMIs and strong Australian growth stats would increase analyst speculation that GBP/AUD is in for a long-term drop. However, US interest rates remain a lingering threat to the Australian Dollar’s 2017 strength.
At the time of writing, the Pound to Australian Dollar exchange rate trended in the region of 1.61. The Australian Dollar to Pound exchange rate traded at around 0.61.
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