Dramatic developments in the currency market have seen the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate trend between 2.0210 and 1.9437 during the past seven days of trading.
RBA Confidence Keeps Pound Sterling to Australian Dollar (GBP/AUD) Weak
The Reserve Bank of Australia released their meeting minutes on Tuesday, which strengthened the Australian Dollar thanks to the upbeat views of policymakers. The minutes still highlighted risks to the Australian economy, especially from a slowdown in China, but the fact that the RBA remained optimistic helped to boost the ‘Aussie’. Pound Sterling was weakened as the core Consumer Price Index failed to increase by as-much-as-expected. Pound appetite was damp as January’s figures showed that UK inflation had remained well below target for two entire years.
The Australian Dollar remained strong on Wednesday despite positive UK unemployment data, which showed a -14.8k drop in the number of people claiming unemployment benefits. Average Weekly Earnings growth dipped slightly, however. The ‘Aussie’ was able to advance thanks to weakness in the US Dollar, after the Federal Reserve’s Eric Rosengren made dovish remarks that suggested the Fed was unlikely to raise US interest rates in March.
Australian Unemployment and UK Reform Deal end Strong ‘Aussie’ Run
Thursday saw disappointing results from Australia’s labour market data, with unemployment unexpectedly creeping up from 5.8% to 6%. 13k people were predicted to have found work in January, but in fact an additional -7.9k left the jobs market. The number of people in full time employment dropped -40.6k.
The resulting Australian Dollar weakness was further compounded by a strong Pound as the vital EU summit in Brussels to discuss the UK’s proposed membership reforms began. While the news from the talks was mixed, the fact that key EU officials expressed their confidence in a deal being reached saw the Pound trending well.
On Friday, data showed that UK government borrowing had been significantly better-than-expected, posting a -£11.2b surplus. The figure means that George Osborne’s target of reducing the UK deficit to -£68.9 billion for the 2015⁄16 financial year could still be achievable. However, as the talks in Brussels dragged on, investors began to speculate that there was too much opposition to a deal. The polarising factors combined to keep the GBP/AUD exchange rate mixed on Friday.
Boris Johnson Batters Pound Sterling
The Australian Dollar saw huge appreciation on Monday after London Mayor Boris Johnson pledged his support to the campaign for Britain to leave the European Union. As one of the few politicians the UK public approves of, his decision to ignore David Cameron’s pleas saw investors deserting the Pound. His defection has seen many experts upping the likelihood that the UK will vote for a ‘Brexit’, although the majority of those forecasts still see a ‘Bremain’ as more likely. The Australian Dollar received a boost during the Australasian session when weekly consumer confidence survey results showed an uptick in sentiment.
GBP/AUD Forecast: UK CPI on Tap
Looking ahead, Australia sees the release of wage and low impact construction data, while the UK has figures on the number of loans for property purchases. Australian Private Capital Expenditure figures are released on Thursday, but these will likely be overlooked due to UK Gross Domestic Product data.
Heads Up
Summary of major upcoming data releases that we think may move the market.