Pound to Australian Dollar Forecast: UK Jobs Data Ahead, will the GBP/AUD Exchange Rate Recover before the BoE Decision?

Update 3: UK Jobs Data Could Lift Pound to Australian Dollar (GBP/AUD) Exchange Rate

Although the Pound to Australian Dollar (GBP/AUD) exchange rate moved further away from last week’s 17-month high on Tuesday, the pairing could bounce back today.

If the UK’s latest employment figures show the increase in growth in average earnings forecast by economists, the Pound could advance on the majors ahead of tomorrow’s Bank of England (BoE) rate decision.

The GBP/AUD exchange rate could also advance during the North American session if the Federal Open Market Committee (FOMC) hikes interest rates at tonight’s gathering and indicates that more rate hikes are on the way in 2018.

The odds of the Fed increasing borrowing costs have been at over 90% for months, so it would take hawkish commentary from policymakers to boost the US Dollar and send higher-risk currencies lower.

Update 2: Pound to Australian Dollar Exchange Rate Tumbles -0.5%

The UK’s latest consumer price index might have surprised to the upside, but the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate still slid by 0.5% on Tuesday.

UK inflation came in at 0.3% on month and 3.1% on the year, beating forecasts of 0.2% and 3.0%.

The Pound failed to benefit from the news and the GBP/AUD exchange rate remained trading lower despite the National Australia Bank Business Confidence index sliding from 9 to 6.

With UK jobs data and the FOMC interest rate decision taking place tomorrow, we could see chaotic conditions in the currency market.

Update 1: Pound to Australian Dollar Exchange Rate Falls -0.3%

The Pound to Australian Dollar (GBP/AUD) exchange rate was struggling on Monday amid a lack of influential UK data and ongoing Brexit concerns.

Fears that the second stage of Brexit negotiations could prove as complex and stilted as the first meant that the Pound lost -0.3% against the Australian Dollar, whilst also declining against the Euro and US Dollar.

The Pound to New Zealand Dollar (GBP/NZD) exchange rate, meanwhile, plummeted over -1% as investors responded to the appointment of a new Governor of the Reserve Bank of New Zealand (RBNZ).

However, while the British currency is fighting a losing battle against the Australian Dollar, a currency strategist from the National Australia Bank believes that AUD is looking vulnerable against the US Dollar.

Rodrigo Catril stated; ‘AUD ended Friday almost unchanged, but looking at the chart the currency remains vulnerable to the downside. The soft weekly close — down 1.4% – has left the AUD vulnerable to the downside with key support level at 0.7490 now well within sight.’

Brexit Uncertainty Triggers GBP Exchange Rate Volatility vs AUD

While the Pound Australian Dollar (GBP/AUD) exchange rate was able to advance by around a cent last week, the pairing experienced significant volatility in the face of Brexit developments.

The Pound fluctuated wildly last week as markets reacted to a rollercoaster ride of Brexit developments.

Monday saw Sterling plummet as a potential Brexit deal was scuppered by the DUP, and the next few days saw the UK scrambling to overcome the thorny issue of the Irish border and reach an agreement before the deadline.

Even the news that a deal was struck at the end of the week failed to stabilise Sterling amid concerns that trade talks would begin in February at the very earliest.

This volatility looks set to persist this week as well, with GBP/AUD tumbling on Monday morning as David Davis clashed with the Irish government over suggestions that the deal struck last week was a ‘statement of intent’ and not a binding agreement.

Australian Dollar Exchange Rate Weakened by Dip in Trade Figures

The Australia Dollar ticked higher at the start of last week as the outlook from the Reserve Bank of Australia (RBA) appeared unusually upbeat following its latest rate decision.

Weighing on the AUD/GBP exchange rate on Wednesday, however, was a larger than expected drop in the country’s third quarter growth figures.

The ‘Aussie’ also struggled at the start of the second half of the week as Australia’s latest trade balance report revealed a sharp drop in the country’s trade surplus in October.

However, the Australian Dollar was lifted by some impressive Chinese trade data at the tail end of last week, with the subsequent jump in commodity prices helping the currency exploit Sterling weakness.

The ‘Aussie’ is struggling to extend gains at the start of this week’s session, with investors cooling on the currency ahead of an expected Federal Reserve rate hike later this week.

Data Affecting This Week’s GBP/AUD Exchange Rate Forecast

12th December 00:30 AU Business Confidence (Nov)

12th December 09:30 UK CPI (Nov)

12th December 23:30 AU Consumer Confidence (Dec)

13th December 09:30 UK Unemployment Rate (Oct)

13th December 09:30 UK Wage Growth (Oct)

14th December 00:30 AU Unemployment Rate (Nov)

14th December 12:00 UK BoE Rate Decision (Dec)

GBP AUD Exchange Rate Forecast: BoE Rate Decision and EU Summit Looming

Looking ahead, the UK will release a swath of data this week, starting with the UK’s latest CPI report on Tuesday. Annual inflation is expected to have held at a five-year high of 3% in November.

The impact of the report on Sterling will be interesting. While high levels of inflation are putting consumers under pressure and restraining consumer spending (Pound negative) persistently high inflation might push the Bank of England (BoE) to change its stance on borrowing costs, and a more hawkish attitude from policymakers would be Sterling-supportive.

An uptick in UK wage figures on Wednesday would also benefit GBP exchange rates.

The Bank of England (BoE) will be delivering its last interest rate decision of the year on Thursday, but the impact of the decision may be muted in light of the EU summit.

EU officials are expected to announce that the UK can move on to discussions about trade and a transitional agreement – a positive outlook for future negotiations could lift GBP.

Meanwhile it is also a busy week for Australian data, with both business and consumer confidence stats set to be published in the first half of the week. A possible dip in sentiment could weaken the ‘Aussie’.

However, investors will be mainly focused on the country’s latest labour report in the second half of the week.

An expected rebound in employment will likely strengthen the Australian Dollar and could send GBP/AUD lower.

John Cameron

John studied economics at Cambridge University and later became an MSTA qualified Technical Analyst. He began working for TorFX almost a decade ago and now holds a Senior Account Manager position. As well as lending his clients support and guidance, John has produced market commentary and detailed exchange rate analysis for a number of online publications.

Contact John Cameron