Update: Focus on US Data Calendar Once Again Benefits GBP/AUD Exchange Rate
GBP/AUD has been able to advance this morning as the approach of two testimonies due from new Federal Reserve Chair Jerome Powell this afternoon boost the Pound Sterling to Australian Dollar exchange rate.
Markets are steering clear of the high-risk Australian Dollar until Powell’s testimonies, which are accompanied by some key US economic data, have been published or delivered.
Powell is expected to largely follow in the footsteps of his predecessor Janet Yellen, but the potential for a shift in direction for US monetary policy is weighing on many major market players today.
Pound Sterling to Australian Dollar Exchange Rate Turbulence as US FOMC Minutes Cause Risk Appetite to Vacillate, although GBP/AUD Ends Week Higher
The impact of domestic developments upon both Pound Sterling and the Australian Dollar was somewhat distorted last week as market focus on the US Federal Open Market Committee (FOMC) policy meeting minutes from January kept the GBP/AUD exchange rate fluctuating.
While markets may have been dwelling on the previous Friday’s disappointing UK retail sales figures on Monday, the GBP/AUD exchange rate was pushed higher due to the approach of monetary policy meeting minutes from the Reserve Bank of Australia (RBA).
Sterling received a boost on Tuesday after it was reported by Business Insider that the European Parliament was preparing a new resolution that would allow for the UK to have ‘privileged’ access to the European single market following Brexit.
Vagueness from the Bank of England (BoE) on Wednesday cut into the Pound’s gains; policymakers signalled more rate hikes than initially predicted in the next three years, but refused to commit to a May hike.
Sterling was left on lacklustre form on Thursday after the latest estimate of fourth-quarter 2017 GDP was unexpectedly revised lower.
Pound Sterling to Australian Dollar Exchange Rate Seesaws on Fluctuating Market Risk Appetite over the US FOMC Meeting Minutes
Although there were several domestic developments of note on the Australian data calendar last week, the Pound Sterling to Australian Dollar exchange rate spent much of the time reacting to developments in the US instead.
Markets were largely focused on the US FOMC meeting minutes, which could have weakened AUD by pointing to four rate hikes this year, or strengthened it by suggesting there would only be three.
This meant AUD largely ignored the impact of positive domestic developments, including a more upbeat-than-expected Reserve Bank of Australia (RBA) account of the latest policy meeting.
The RBA remained firm that it would not begin hiking interest rates just because the central banks of other developed economies have started to do so, but at the same time slightly upgraded its outlook for the Australian economy.
Even better-than-expected wage growth figures for the fourth-quarter couldn’t do much to stall the GBP/AUD exchange rate advance, despite the fact that these will improve the odds of the medium-term rate hike.
Top US Data Forecast to Hammer Australian Dollar, Supporting GBP/AUD Exchange Rate Even as Pound Sterling Awaits Mark Carney Speech
Pound Sterling could lack intrinsic momentum this week, as markets are likely to focus on late-week PMIs and Friday’s speech by Bank of England Governor Mark Carney. Nevertheless, numerous high-impact US data releases could pressure the Australian Dollar lower, keeping the GBP/AUD exchange rate on strong form.
Markit will begin releasing its February round of PMIs towards the weekend, starting on Thursday with the manufacturing index and following up on Friday with the construction index.
January’s PMIs all surprised with a greater-than-expected drop, so signs of a repeat performance would significantly weaken Pound Sterling.
Soft economic data has recently undermined confidence that the Bank of England could be on track to raise interest rates in May; Friday’s speech from Mark Carney will therefore be carefully dissected for clues regarding his outlook on monetary policy.
Meanwhile, most of the week’s domestic Australian data may be overlooked in favour of more impactful US data.
After noting this evening’s ANZ Roy Morgan consumer confidence index for the week ending 25th February, markets will be distracted by the release of new Federal Reserve Chair Jerome Powell’s Congressional Testimony, as well as the advance goods trade balance, durable goods orders, consumer confidence index and a Testimony by Powell to the House Financial Services Committee.
While Australian private sector credit data on Wednesday will help gauge business confidence and activity at the start of the year, the Chinese February manufacturing PMI and US fourth-quarter GDP figures are likely to steal the limelight.
The same could happen on Thursday, where US personal consumption expenditure figures will dwarf Australian fourth-quarter private capital expenditure reports.