Surprise Australian Deficit Lifts GBP/AUD Exchange Rate
Australia’s trade balance fell significantly short of forecast and into a state of deficit, offering support to the Pound to Australian Dollar (GBP/AUD) exchange rate ahead of the weekend.
Investors were further discouraged by news that the October figure had also been revised down to show a deficit, breaking the streak of trade surpluses that started in May.
This indicates that the Australian economy is not in quite as strong a state as markets had previously thought, prompting AUD exchange rates to soften sharply overnight.
Flat export volumes were a significant factor in this disappointing data, although this raises hopes for a reversal of the decline over the coming months thanks to the recent surge in copper and other base metal prices.
With the Chinese economy showing fresh signs of strength in the latest raft of PMIs demand for Australian exports looks set to increase once again, somewhat limiting the negative impact of the trade data.
Rising UK Productivity Shores Up Pound Sterling Exchange Rates
News of a sharp decline in UK new car sales put pressure on the Pound to Australian Dollar (GBP/AUD) exchange rate, meanwhile, as the industry suffered its largest drop in sales since 2009.
This was seen as the latest reflection of ongoing Brexit-based uncertainty and falling consumer confidence, coupled with the continued backlash against diesel cars.
Even so, as the latest report from the Office for National Statistics indicated that UK productivity jumped 0.9% in the third quarter of 2017 this limited the softness of the Pound (GBP).
Still, the UK continues to lag far behind its pre-financial crisis levels of productivity growth.
With the question of Brexit hanging over the economy there is a risk that the economy will struggle to sustain this level of productivity over the coming year, especially if negotiators fail to secure some manner of transition arrangement.
GBP/AUD Exchange Rate Gains Forecast on Weaker Australian Construction PMI
Greater gains could be in store for the Pound to Australian Dollar (GBP/AUD) exchange rate at the start of the new week, with forecasts pointing towards a dip in the Australian construction PMI.
While the construction sector is not the major driver of the Australian economy any loss of momentum here could still see the Australian Dollar (AUD) dented.
China’s consumer price index data could also provoke volatility for AUD exchange rates, as data from the world’s second largest economy is prone to do.
If inflationary pressure shows fresh signs of strengthening this is likely to encourage greater market risk appetite, to the benefit for the Australian Dollar.
Persistent bearishness towards the US Dollar (USD) may equally put pressure on the GBP/AUD exchange rate in the near term.
Steady UK GDP Estimate Forecast to Support GBP/AUD Exchange Rate
Confidence in Pound Sterling (GBP) exchange rates could slump sharply if the NIESR gross domestic product estimate for the three months to December proves discouraging, weakening the GBP/AUD exchange rate further.
Any suggested slowdown in growth may encourage investors to pile back out of Sterling, with Brexit concerns likely to continue weighing on the economy in 2018.
On the other hand, if economic growth held steady at 0.5% in the fourth quarter this could prompt a fresh GBP exchange rate rally.
Although it remains questionable whether the Bank of England (BoE) will opt to raise interest rates again in the near future, given the sluggishness of domestic wage growth, a solid GDP reading would give policymakers some cause for optimism.