A seemingly positive UK report failed to support the Pound today, leading to a small decline against the Australian Dollar.
Pound News: GBP Dips on Borrowing Surplus Implications
While today’s UK economic news has been positive on paper, the Pound has failed to advance against the Australian Dollar.
The news in question was that the UK’s government borrowing deficit in July rose to a surplus for the first time since 2002.
While this triggered an initial Pound to Australian Dollar rise, trader confidence soon gave way to scepticism.
In particular, economists latched onto the fact that a surplus had only been reached because of higher tax receipts, something that will not remain a consistent factor in future borrowing calculations.
Embodying this sentiment was Samuel Tombs of Pantheon Macroeconomics;
‘The first surplus since 2002 is not a signal that the economy is in rude health.
Self-assessed tax payments were unusually low last year because the deadline for payments on account fell on a weekend, meaning that many payments were not received until August’.
Australian Dollar Advances on Slow Data Day
With little direct news to affect it, the Australian Dollar has mainly been pushed up by commodity news today.
Iron ore prices have risen for three sessions in a row.
While there are concerns of lower Chinese demand for iron ore in September, for the time being this news has reassured Australian Dollar traders.
GBP/AUD Decline Possible on Weekly UK GDP Data
For the rest of the week, the Pound/Australian Dollar exchange rate could be influenced by a cluster of UK announcements on Thursday morning.
These will primarily cover levels of business investment reported in Q2, as well as updated GDP growth figures for the same period.
Projections have been mixed for the GDP figures, but the Pound may still decline overall on the news. Business investment is tipped to slow in the second quarter, both on the quarter and the year.
For the more high-impact GDP results, a quarterly rise is predicted alongside a larger annual slowdown. Yearly figures are usually more impactful than quarterly readings, so an annual dip may ultimately drag down the GBP AUD exchange rate.
The only real source of influence for the Australian Dollar will be US Dollar movement.
The US Dollar may appreciate over Thursday and Friday, when Federal Reserve officials attend the Jackson Hole Symposium. This event brings together Fed policymakers from across the US, as well as central bankers from other countries.
If Fed policymakers hint at higher interest rates in the near term or tightening monetary policy, then the US Dollar may appreciate and higher risk currencies (like the ‘Aussie’) may fall.