After a tumultuous start to the week, the Pound stabilised against the ‘Aussie’ on Tuesday and recorded modest gains.
The Australian Dollar, on the other hand, slumped against most of its rivals due to disappointing domestic data and warnings regarding Australia’s credit rating.
The week began with the Pound dropping to a low of 1.9081 against the Australian Dollar, although it later climbed back to 1.9311.
Sterling Knocked by EU Referendum Polling Stats
Although the week has only just gotten underway, the Pound has already shown itself to be highly susceptible to market shocks, specifically those relating to the latest EU Referendum polls.
For the most part, a significant change in sentiment has been recorded, with the ‘Leave’ campaign climbing notably in the polls and putting the ‘Remain’ campaign on the back foot. Additional damage has been dealt to hopes of a stability-linked ‘In’ vote due to implications that demographics previously thought to be pro-EU (young people and females) are switching from ‘Remain’ to ‘Leave’.
In domestic data news, UK inflation has remained stagnant on the year in May at 0.3%, which has been attributed to rising fuel costs being offset by falling clothing and food prices.
Australian Dollar Unsettled after Warning about National Credit Rating
Economic data out of Australia has been fairly limited of late, with the most recent contributions being respectively flat and falling business conditions and confidence figures for May.
The biggest influencer on the currently low Australian Dollar has been a report from national think-tank the Committee for Economic Development of Australia (CEDA), which has blasted the recent budgets put out by the competing Coalition and Labour groups as not doing enough to tackle the current budget deficit.
CEDA has further stoked the flames of uncertainty by estimating that the nation’s current AAA credit rating may fall if both election competitors don’t revise their budget plans and come up with more accommodative policy measures to get economic spending under control.
GBP/AUD Exchange Rate Forecast
Over the rest of the week, Pound Sterling/Australian Dollar exchange rate movement may occur as a result of tomorrow’s Australian confidence results, as well as the UK claims, unemployment and earnings results due on the same day.
Also worth noting is Thursday’s Reserve Bank of Australia (RBA) bulletin, Australia’s unemployment stats, UK retail sales results and the Bank of England (BoE) interest rate decision.
In brief, forecasts have been for falling Australian confidence, rising UK claims, flat unemployment for the UK and falling earnings.
On Thursday, Australian unemployment is forecast to rise while UK retail sales have a decline predicted. It is considered extremely unlikely that the BoE will touch the national interest rate, therefore the simultaneously released minutes are expected to generate the most movement for Sterling on Thursday.