GBP/AUD Exchange Rate Stumbles as Australian Trade Surplus Swells

March 4, 2021 – Written by John Cameron

The Pound to Australian Dollar (GBP/AUD) exchange rate lost its footing even as the UK construction PMI bettered forecasts.

Although forecasts had pointed towards an uptick in the PMI the index surprised investors by jumping from 49.2 to 53.3 on the month.

This suggests that the construction sector returned to a state of solid growth in February, in spite of the ongoing pressures stemming from the Covid-19 crisis.

However, the ultimate impact of the data was ultimately limited thanks to the fact that the construction sector only accounts for a small fraction of the UK gross domestic product.

As long as the UK services sector remains under pressure the risk of a negative first quarter growth rate remains, to the detriment of GBP exchange rates.

Australian Dollar (AUD) Exchange Rates Benefit from Widened Trade Surplus

The mood towards the Australian Dollar improved, meanwhile, as January’s trade balance showed a surprise widening of the surplus.

While markets had expected to see a narrowing the surplus instead grew from A$ 7.13 billion to A$ 10.14 billion, indicating a stronger month of trade activity.

With the Australian economy still showing signs of shaking off the malaise of the wider global economy the appeal of the Australian Dollar naturally improved.

As exports volumes also showed a solid 6% increase on the month this added to the positive mood of AUD exchange rates, even as January’s finalised retail sales showed a slight downward revision.

GBP/AUD Exchange Rate Forecast: Volatility Likely on Chinese Trade Data

Further volatility is likely for the GBP/AUD exchange rate as market risk appetite shifts in the days ahead.

The latest set of Chinese trade data, as well as commentary from the current National People’s Congress, could offer a potential boost to the Australian Dollar.

As the Australian Dollar commonly functions as a market proxy for sentiment towards the Chinese economy any encouraging signs here could see AUD exchange rates pushing higher.

On the other hand, fresh signs of resilience within the UK housing market could keep a floor under GBP exchange rates ahead of the weekend.

If the Halifax house price index demonstrates growth on the month, in spite of the ongoing national lockdown, the Pound could hold onto its stronger footing for another day.

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TAGS: Pound Australian Dollar Forecasts