Despite a mixed start to the session, the Pound Australian Dollar (GBP AUD) exchange rate was able to register gains of around a cent and a half over the course of last week as the pairing was lifted by improved Brexit sentiments following the fourth round of talks.
Pound Bolstered by Brexit ‘Progress’, Australian Dollar Weakened by Drop in Iron Ore Prices
After a false start to week last Monday, the GBP AUD exchange rate was able to push higher on Tuesday as the Australian Dollar was pressured by a further slump in iron ore prices, a trend that would continue to hamper the ‘Aussie’ due to a lull in domestic economic data.
Adding to the Australian Dollar’s woes was the strength of the US Dollar last week, with investors shunning the riskier Australian currency in favour of the ‘Greenback’.
Meanwhile, the Pound’s advance was aided by a speech by Brexit Secretary David Davis on Thursday as he suggested that there had been ‘decisive steps forward’ in Brexit negotiations during his closing remarks following the fourth round of Brexit talks with the EU.
GBP Pressured by GDP Figures, Current Account Deficit Grows
However, after striking a new three-month high on Thursday the Pound was unable to stabilise at its best levels, with the currency being swiftly undermined by the UK’s final second quarter GDP data. The ONS revised its annualised growth figure to 1.5%, down from a previous estimate of 1.7%.
Adding to the pressure on Sterling at the end of last week was the release of the UK’s disappointing current account figures for the second quarter. The nation’s account deficit rose from £22.3bn to £23.2bn in the three months to July, falling behind expectations that it would shrink to £16bn.
GBP AUD Forecast: Sterling to be Softened by PMI Data?
With the Pound already starting the week’s session on the back foot thanks to a worse than expected Manufacturing PMI, the fall in Sterling may continue if the remaining PMI figures also fall short this week.
An expected downturn in the Construction PMI tomorrow may not hit GBP AUD too heavily, however, as the sector’s small contribution to UK economic growth and a possibly dovish meeting from the Reserve Bank of Australia (RBA) may limit losses.
However, should the UK’s all-important services sector report on Wednesday show that activity fell last month, Sterling could face some pressure as the sector accounts for over 70% of UK economic growth.
Meanwhile, AUD investors will also be looking out for Australia’s latest trade figures this week, with the ‘Aussie’ possibly advancing overnight on Wednesday if the nation’s trade surplus rises in August as expected.