The Pound has opened trading this week on a surprisingly strong footing, having been bolstered by a shift in reactions to last week’s scare about when Article 50 would be triggered.
The Australian Dollar has made a far less illustrious start to the week, with the transition of Reserve Bank of Australia (RBA) Governors raising concerns about the future direction of the Australian economy.
Sterling Rallies as Article 50 Fears Give Way to Renewed UK Confidence
The Pound rose considerably against the Australian Dollar and almost all other peers as trading opened this week.
While last Thursday brought news of rising UK retail sales in July, which triggered a Sterling surge, Friday saw the gains reversed by a speculative story that April 2017 would be the latest that Article 50 would be triggered.
Sourced from two unnamed government officials, the report implied an earlier-than-expected start to the UK’s official exit from the EU – while this was quickly denied by Downing Street, the Pound closed out the week down from its best levels.
Renewed optimism that the UK’s exit from the EU will not be triggered in the near future gave Sterling a leg up against its main currency counterparts on Monday.
Australian Dollar Losses Come from Iron Ore Costs, RBA Fears
While the week so far has not brought any major Australian data, ‘Aussie’ exchange rates have none-the-less slipped, with the currency trading at 0.58 against the Pound and dropping off in most other pairings.
Commodities news has seen the price of iron ore edge up slightly, though given how sporadic losses and gains have been for the precious commodity, this has failed to inspire much long-term confidence.
Investor focus has mainly been squared on the RBA, which is in a transitionary period between Governor Glenn Stevens and his successor, Philip Lowe.
With wage growth moving at a glacial pace and the issue of switching over from mining to another sector still present, the argument has been made that low incomes should be the target of future RBA policy projects, instead of the inflation rate.
GBP/AUD Exchange Rate Forecast
Over the current week, Pound Sterling/Australian Dollar exchange rate movement may occur as a result of the UK’s Confederation of British Industry (CBI) data and Friday’s business investment and GDP stats, as well as a speech from Bank of England (BoE) official Nemat Shafik.
Australian news will cover construction work results for Q2 on Wednesday, as well as capital expenditure for the same period on Thursday.
The CBI results are forecast to worsen along with UK business investment, though GDP is expected to rise. From Australia, the only expectation has been for a shift in construction work from -2.6% to -0.5%.