The past week has seen the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate fluctuate wildly in response to both domestic data releases and wider economic factors.
On the home front, Sterling was softened last Tuesday by highly disappointing UK Industrial and Manufacturing Production figures. Further GBP losses were recorded on Thursday when the first Bank of England (BoE) Interest Rate Decision of 2016 resulted in the now-familiar8-1 vote against adjusting borrowing costs.
Demand for the Australian Dollar, meanwhile, was bolstered on Thursday when Australian employment data failed to show the increase in domestic unemployment forecast by economists. The jobless rate held at 5.8% instead of climbing to 5.9%.
So far this week the Pound has yo-yoed slightly against its major peers. Monday saw the Pound appreciate on fears it had previously been oversold, but today has seen all of its advances wiped away.
The cause of the latest GBP decline was BoE Governor Mark Carney, who presented his first economic assessment of 2016. Carney’s speech managed to send the Pound plummeting as he assured the audience that no UK interest rate hikes would be taking place anytime soon. Carney cited China’s economic slowdown, the unstable price of crude oil and poor UK market conditions as the reasons behind this decision.
The Australian Dollar has managed to sustain a rally today amid less risk-adverse trading conditions. The ‘Aussie’ edged higher despite China’s 25 year low GDP growth as investors bet the latest poor ecostat for the world’s second largest economy will push Chinese policymakers into taking stimulatory action.
For the rest of the week, Pound Sterling/Australian Dollar exchange rate movement may occur as a result of the UK’s remaining high impact economic announcements, which include tomorrow’s Average Weekly Earnings, ILO Unemployment Rate and Jobless Claims Change data, as well as Friday’s Retail Sales figures for December.
Australian releases still left to be published are tonight’s Westpac Consumer Confidence score for January and Thursday’s Consumer Inflation Expectation for the same month.
If the UK’s jobs data shows the unchanged unemployment rate and slower pace of average earnings forecast by economists, the GBP/AUD exchange rate could extend declines.
On the Australian side, no forecasts have been made for the Consumer Confidence result but the previous outcome was -0.8%.
Heads Up
Summary of major upcoming data releases that we think may move the market.