While the Pound recovered against many major rivals on Monday morning, GBP/AUD trended flatly as the Australian Dollar also saw increased demand.
GBP/AUD lost around half a cent last week but managed to hold 1.61. The pair remained in this region on Monday but could slip to 1.60 if the Pound fails to keep up its modest recovery.
Pound (GBP) Edges Higher, Article 50 Speculation Heats Up
Monday morning saw the Pound holding its ground against the Australian Dollar as the British currency looked to recover some of the widespread losses recorded last week.
Despite this, the Pound remains vulnerable. Many investors are preparing for the possibility that Article 50 could be activated as soon as this week, a move that would kick off the formal Brexit process.
Sterling was weakened last week by ongoing concerns about Britain’s 2017 growth prospects. An increase in UK inflation and a slowing in wage growth has indicated to investors that the nation’s driving services sector could falter in the months ahead, and (depending on the turn they take) the Brexit negotiations could further dim the UK’s economic outlook.
Australian Dollar (AUD) Recovers as USD Bullishness Fades
The Australian Dollar failed to capitalise on a weak Pound for most of last week due to surging bets that the Federal Reserve would hike US interest rates in its March meeting.
However, as investors have already largely priced in a March Fed rate hike, the US Dollar appears to have gained as much as it can on the news and investors have begun to sell off the currency in favour of riskier currencies like the Australian Dollar.
Recent solid Australian ecostats, defiant prices of Australia’s iron ore exports and anticipation for this week’s Australian jobs report have also supported the ‘Aussie’.
Key Unemployment Reports Ahead
Jobs data will be a key motivator of Pound to Australian Dollar exchange rate movement this week, although Australian business confidence and consumer confidence prints may influence the ‘Aussie’ until then.
Britain’s February jobless claims figures and employment stats for the three months through January will be published on Wednesday, along with the influential wage growth number. If average earnings come in below expectations the Pound could slide.
Australia’s February employment report will follow during Thursday’s Asian session.
Thursday will also see the Bank of England (BoE) hold its March monetary policy decision. Investors will be keeping an eye out for the possibility of a shift in tone from BoE Governor Mark Carney.
It’s also possible that Article 50 could be activated in the next week or so. The beginning of the formal Brexit process is likely to have a negative effect on Pound trade initially.