Even as the Pound finds fresh support in UK data today, the British Pound to Australian Dollar (GBP/AUD) exchange rate continues to tumble on lasting Australian Dollar strength. Investors are piling into the ‘Aussie’ on risk sentiment as well as strong Australian data, but upcoming Australian trade and retail sales data could still dampen the currency by the end of the week if it disappoints. Meanwhile, Brexit speculation will continue to drive Sterling.
Last week saw GBP/AUD surge significantly, gaining from 1.9146 to 1.9730 throughout the week. This week’s losses have been almost as huge, and GBP/AUD has fallen from 1.9730 to around the level of 1.9322 so far.
GBP/AUD continues to trend above last week’s opening levels, as coronavirus concerns still persist and limit the Australian Dollar’s potential for gains.
GBP Exchange Rates Steadying as UK Data Boosts UK Economic Rebound Hopes
The Pound plummeted across the board at the beginning of the week, as fresh comments from UK and EU officials led to a revival in hard Brexit fears.
However, the Pound’s fall slowed yesterday and against many major currencies the Pound began to rebound today.
Even though the Pound continues to tumble against a strong Australian Dollar, its losses have slowed, largely thanks to stronger than expected UK data published in the past few sessions.
Yesterday’s stronger than expected UK construction data caused Bank of England (BoE) interest rate cut bets to fall, and today’s UK services PMI was even more impressive.
Services make up the most notable chunk of Britain’s economy, so today’s stronger than expected services data boosted hopes of a UK economic rebound in early 2020.
UK services jumped from a stagnant 50.0 to 53.9 in January, better than the expected 52.9.
According to Tim Moore, Economics Associate Director at IHS Markit:
‘January’s PMI surveys give a clear signal that the UK economy has picked up since the general election, as a diminishing headwind from political uncertainty translated into rising business and consumer spending. We maintain our nowcast of UK GDP rising by approximately 0.2% in the first quarter of 2020, which represents an improvement on the sluggish conditions seen at the end of last year.
A solid return to growth in the service sector was the main factor behind the recovery in the UK economy, with survey respondents commenting that a rebound in sales enquiries had quickly translated into rising workloads so far this year.’
AUD Exchange Rates Continue to Climb as Coronavirus Jitters Ease
The Australian Dollar is a currency often correlated to trade and risk-sentiment. Notably, it is also correlated to Chinese economic sentiment due to Australia and China’s close trade ties.
This was why the ‘Aussie’ took the brunt of last week’s market panic over a coronavirus outbreak, which has caused major lockdowns in China.
However, it is also why the Australian Dollar has seen most of the recovery this week, as coronavirus concerns lighten slightly.
While markets remain anxious about the virus spread, the situation has not seen any fresh shocks since last week. This has made investors hope that the situation could be kept under control and minimise potential economic damage.
This week’s speculation that some treatment for the virus had been discovered led to stronger demand for risk-correlated asserts, even though the reports were refuted by some officials.
On top of coronavirus hopes, the Australian Dollar has been benefitting from Australian economic hopes.
The Reserve Bank of Australia (RBA) avoided becoming more dovish in this week’s policy decision, and the latest Australian data has been beating forecasts. This includes last night’s Australian PMIs from CommBank, which unexpectedly printed growth rather than contraction.
GBP/AUD Exchange Rate Forecast: Australian Data in Focus
This week’s UK data has all been published now, and generally indicates that Britain’s economic outlook is showing strong signs of recovery.
With UK economic rebound hopes high, the Pound is likely to see stronger support going forward. This will limit Sterling’s potential losses in reaction to hard Brexit fears, even if hard Brexit jitters persist.
Pound investors will be focused on Brexit developments amid a lack of notable data due soon, but upcoming Australian data could also influence GBP/AUD.
Thursday’s Asian session will see the publication of Australian trade balance and retail sales results from December.
If Australian retail sales beat forecasts, it could further boost market hopes of Australian economic resilience, douse remaining Reserve Bank of Australia (RBA) speculation, and put pressure on the Pound to Australian Dollar exchange rate.
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