The last few days saw the Pound Australian Dollar exchange rate undulating as markets awaited the latest developments from the US and UK central banks.
GBP AUD Flip-Flops as Markets Tense before Central Bank Meetings
Last week opened with the Australian Dollar firmly in bullish territory. Investors were holding their breath ahead of the week’s widely-anticipated US Federal Reserve policy meeting, which boosted risk-appetite; this was odd, considering the Fed was expected to hike interest rates. Meanwhile, the Pound was undermined by the British Chambers of Commerce (BCC) growth forecasts, which projected growth of 1.4% in 2018, down from earlier projections of 1.8%.
Central bank expectations also weighed on the Pound as the week progressed however, with GBP/AUD recovering on Tuesday as investors took the latest above-forecast inflation data to mean that the Bank of England (BoE) would be forced to hike interest rates.
Wednesday – the eve of the Federal Reserve policy announcement – saw the pairing stuck around opening levels. Australian consumer confidence had continued falling at an accelerated pace of -3.9%, but UK employment edged lower for the first time in a year.
The Federal Reserve may have hiked rates and upped their policy outlook for 2017, but it was the Pound that was making losses on Thursday. Strong employment data from Australian helped the ‘Aussie’ edge into positive territory after reports showed employment change had increased by more-than double the forecast amount. Meanwhile, GBP/AUD was undermined by the fact the BoE claimed stronger-than-expected Sterling exchange rates would counterbalance the above-forecast pace of inflation.
GBP/AUD Edges into Negative Territory despite Warning of Widening AU Deficit
Australian public finances will be over -AU$10 billion worse off by the 2019-21 fiscal year than forecast earlier, according to the Australian government. The government had, earlier in the year, promised to balance the budget by 2021, but news that there will still be an AU$10.4 billion deficit by mid-2020 unsettled investors.
Nonetheless, it is the Pound that is weakening today. A new survey by the Confederation of British Industry (CBI) has shown that businesses are worried about the outlook of the UK job market, even as they intend to continue hiring more permanent staff.
According to the CBI data, 50% of firms expect the UK jobs market to become less attractive in the coming five years; just under twice as many as believe it will become more attractive. Nearly 65% of British firms describe the skills gap as the biggest threat to UK labour market competitiveness, while access to labour supply ranks second, reported by 35% of firms.
GBP/AUD Exchange Rate Forecast; Does Empty Data Calendar Give GBP the Advantage?
After tomorrow’s release of the latest Reserve Bank of Australia (RBA) meeting minutes, there is no influential data set for release before Christmas. This could open the door for GBP/AUD exchange rates to advance, given that the ‘Aussie’ will have little resistance and could be threatened by the slew of incoming US data throughout the week.
Meanwhile, the UK will release government borrowing figures tomorrow, consumer confidence figures on Thursday and finalised GDP on Friday.