The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate experienced some fairly notable movement this week, fluctuating within the range of 2.0241 to 2.0817.
China Slowdown Weighs on AUD
In general, the Australian Dollar has softened versus its major peers since the turn of the year. This has mostly been the result of significantly dampened trader risk-appetite in response to Chinese economic woes and turmoil in global equity markets. The rapidly falling price of oil is also having a detrimental impact on market sentiment, with safe-haven demand pushing the US Dollar higher; adding to ‘Aussie’ (AUD) headwinds. In terms of domestic data, largely disappointing results have compounded ‘Aussie’ losses. Perhaps most disappointing was January’s Westpac Consumer Confidence Index which dropped from 100.8 to 97.3.
Pound Sterling Boosted Last Week by Borrowing Data
Having started the week in a soft position, Pound Sterling closed last week having appreciated significantly following mostly positive domestic data. Tuesday saw the strongest UK inflation data for eleven months, Wednesday saw the lowest UK unemployment level for nine years and on Friday UK car production figures hit a decade high and UK public finances improved substantially. However, concerns regarding Bank of England (BoE) interest rate delays and uncertainty surrounding the forthcoming EU referendum limited Sterling’s appreciation.
GBP/AUD Exchange Rate Strengthens after Australian NAB Data
On Monday the Pound Sterling to Australian Dollar exchange rate advanced by around 0.3% during the European session. The ‘Aussie’ softened versus most of its major peers thanks to a combination of weak domestic data and damp market sentiment. December’s NAB Business Conditions dropped from 10 to 7, and December’s NAB Business Confidence cooled from 5 to 3. Trader risk-appetite dampened in response to tanking crude oil prices which has seen recent gains pared. Meanwhile the Pound declined versus most of its major peers, with the exception of commodity-correlated assets, after domestic data failed to impress. The first-quarter CBI Business Optimism Index gained from -12 to -4, but January’s CBI Industrial Trends Orders dropped from -7 to -15.
Australian Inflation and UK GDP Data Ahead
Looking ahead, Wednesday is likely to be significant for those trading with the Australian Dollar with fourth-quarter consumer price data due for publication. With an absence of other influential Australian economic data this week, with the exception of December’s Private Sector Credit on Friday, the ‘Aussie’ is likely to see volatility in response to developments in China and changes in market sentiment. In terms of British data, Thursday’s fourth-quarter Gross Domestic Product report will be most closely watched. In the main, however, a quiet economic docket this week should see GBP/AUD trade in response to stock volatility and market sentiment.
Heads Up
Summary of major upcoming data releases that we think may move the market.