The Pound to Australian Dollar exchange rate ended last week down around three cents from its best levels of 1.67 as the Bank of England’s (BoE) latest meeting caused Sterling to plunge.
GBP/AUD cautiously strengthened when markets reopened this week however as risk appetite declined.
Pound Gains Limited by Bank of England (BoE) Dovishness
There was little reason for investors to buy the Pound last week, as the Bank of England (BoE) took a more dovish than expected outlook on monetary policy.
The bank voted 6-2 to keep monetary policy frozen as expected, but the bank cut its UK growth and wage growth forecasts, disappointing Pound traders.
UK growth is now forecast to come in at 1.7% in 2017 and 1.6% in 2018, with wage growth forecast to be around 3% in 2018.
The growth revisions were seen to reduce the odds of the BoE making any adjustments to stimulus in the near future and sent GBP exchange rates reeling.
Australian Dollar (AUD) Struggles as Risk-Sentiment Drops
The Australian Dollar experienced a volatile week of trading thanks to a dovish August Reserve Bank of Australia (RBA) meeting and strong US jobs data.
Friday saw the publication of July’s US Non-Farm Payroll report, which impressed investors and boosted both Federal Reserve rate hike expectations and US Dollar.
With the odds of a third US rate hike taking place in 2017 rising, higher risk currencies like the Australian Dollar were pressured lower.
This risk-off attitude persisted on Monday, helping the Pound to Australian Dollar exchange rate recover from its worst levels.
The Australian Dollar failed to benefit from Monday’s domestic data despite July’s construction PMI from AiG improving from 56 to 60.5%.
GBP/AUD Forecast: Australian Confidence Data in Focus
Britain’s economic calendar is quiet for most of the week. Unless Brexit news influences Sterling exchange rates, the Pound is likely to remain relatively limp until Britain’s trade balance stats are published on Thursday.
For most of the week, GBP/AUD may be driven by Australia’s latest business and consumer confidence surveys.
Tuesday will see the publication of NAB’s July business confidence survey, followed by Westpac’s August consumer confidence survey on Wednesday.
Australia’s June home loans results will be published too, which could impact how markets view Australia’s ongoing house pricing issue.