April 7, 2021 – Written by Toni Johnson
Despite the Pound being sold from its best levels in profit-taking this week, the British Pound to Australian Dollar (GBP/AUD) exchange rate continues to trend relatively closely to its best levels in months. The Australian Dollar’s strength is limited due to mixed demand for risk and trade-correlated currencies, as global economic hopes are weighed by fears of a potential ‘third wave’ of coronavirus infections.
Last week was yet another volatile week for GBP/AUD. The pair opened the week at the level of 1.8070 and spent the week climbing, ultimately closing the week at the level of 1.8173.
GBP/AUD also touched on a high of 1.8262 before markets closed for the week. This was the best level for GBP/AUD all year, since late 2020.
Since markets opened this week though, GBP/AUD has been trending lower as investors sell the Pound back from its best levels. GBP/AUD briefly lost all of last week’s gains yesterday, but today is trending a little higher again. At the time of writing, GBP/AUD is trending in the region of 1.8131.
Pound Sterling (GBP) Exchange Rates Steady after Yesterday’s Tumble
Investors sold the Pound en masse yesterday. As the British currency struck its best levels in months against many major rivals including the Australian Dollar, investors took profit from the Pound’s high levels.
The Pound has attempted to rebound again this morning as the selloff cools. However, today’s UK data fell slightly short of expectations and may have weighed on the British currency’s potential for recovery.
Britain’s key March services and composite PMI, one of the clearest indicators so far of UK economic performance for the past month, fell short of projections.
UK services were forecast to jump an impressive 56.8. However, the figure only rose at 56.3, and the overall composite PMI also fell short of expectations with a figure of 56.4.
Ultimately though, the data didn’t have much negative impact on Sterling. This is because the data continued to suggest that Britain’s economy was rebounding from months of poor performance.
According to Tim Moore, Economics Director at IHS Markit which compiles the report:
‘UK service providers were back in expansion mode in March as confidence in the roadmap for easing lockdown restrictions provided a strong uplift to new orders. Total business activity increased at the fastest rate since August 2020 and this return to growth ended a four-month sequence of decline.’
Australian Dollar (AUD) Exchange Rates Benefit from Global Growth Hopes, Data
The Australian Dollar has seen mixed movement in recent weeks, as market speculation over global coronavirus infections and recovery have been jittery.
Speculation of a ‘third wave’ of infections hit the risk and trade-correlated Australian Dollar lower last week. This week though, hopes for global growth are returning and this is helping the ‘Aussie’ to hold its ground a little better.
Today’s Asian session saw the publication of Australia’s own March services PMI report.
Australia’s services PMI was actually a little weaker than expected. However, it still showed notable improvement from April’s figures, keeping markets optimistic about Australia’s potential for recovery overall.
According to Usamah Bhatti, Economist at IHS Markit:
‘March PMI data pointed to an ongoing upturn in business condition in the Australian service sector throughout the first quarter of 2021. Both activity and new business recorded further sharp expansions in March, with firms noting that the continued easing of COVID-19 restrictions had boosted client confidence across much of the services economy’
GBP/AUD Exchange Rate Forecast: More Australian Services and Building Data Ahead
Most of this week’s notable UK and Australian data has been published already, having little major influence on the Pound or Australian Dollar outlooks.
While Pound investors will be focused on coronavirus developments and reopening hopes until next week’s UK growth data, some upcoming Australian data could be fairly influential for the ‘Aussie’.
Friday will see the week’s remaining Australian data, in the form of Australian building permits from February, as well as another services PMI from Ai Group.
Surprising figures, or a shift in global market sentiment, are the most likely factors that could cause a shift in GBP/AUD before markets close for the week.
Looking ahead to next week, a slew of more influential UK and Australian ecostats are due.
On top of potential coronavirus developments, key UK growth rate and Australian job market results could influence the Pound to Australian Dollar exchange rate next week.
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