Reaction to the 2017 UK Budget saw the GBP AUD exchange rate fluctuating sharply ahead of the weekend.
Poor UK Growth Outlook Forecast to Inhibit Pound Sterling (GBP) Exchange Rates
Pound Sterling (GBP) exchange rates struggled as the nature of the Office for Budget Responsibility’s (OBR) downgraded economic forecasts weighed heavily on the minds of investors, thanks to the suggestion that the domestic outlook is rather weaker than previously thought.
YouGov’s November consumer confidence survey did not encourage particular confidence either, falling to its joint-lowest level since the Brexit vote.
Even so, this was not enough to keep the Pound on a weaker footing against the Australian Dollar during Friday’s European session.
Demand for the Pound was instead buoyed by speculation that Theresa May could be close to a breakthrough on Brexit as she met with EU leaders.
AUD Exchange Rate News: Australian Dollar Failed to Capitalise on Strong Construction Data
Although the third quarter Australian construction work data bettered expectations earlier in the week, this failed to offer much in the way of support to Australian Dollar (AUD) exchange rates.
Despite construction output surging 15.7% on the quarter, markets maintained a generally cautious view of the Australian economy, keeping the antipodean currency in check.
While the Reserve Bank of Australia (RBA) adopted a slightly more upbeat tone in its November meeting minutes, the odds of any imminent interest rate hike remain distinctly low.
Thinner US trading volumes over the Thanksgiving holiday offered some support to the Australian Dollar, though, as market risk appetite picked up somewhat.
However, the GBP AUD exchange rate was still able to return to an uptrend ahead of the weekend, capitalising on the lack of fresh Australian data.
Pound Sterling to Australian Dollar (GBP AUD) Exchange Rate Vulnerable to Brexit Volatility
Brexit-based developments are likely to remain a key influence for the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate in the coming week, with markets still hoping to see signs of progress towards an agreement.
Unless the EU signals that it is ready to give the go ahead to start the second phase of negotiations, though, any GBP upside will remain limited.
If the recent deadlock breaks, however, this could see the GBP AUD exchange rate surge, even though a significant degree of Brexit-based uncertainty will remain regardless of any progress at this stage.
Wednesday’s raft of UK lending data will also be in focus, with the latest net consumer credit and mortgage approvals figures set to provoke volatility for the Pound.
Any softening of financial conditions could weigh heavily on Sterling, giving investors fresh reason to sell out of GBP exchange rates in the short term.
Weaker Australian Investment Could Dent AUD Exchange Rates
A fresh uptick in Australian private sector credit may be enough to shore up Australian Dollar (AUD) exchange rates in the week ahead.
While forecasts point towards a slight acceleration in credit, this may fail to prompt an Australian Dollar rally if Thursday’s third quarter private capital expenditure figure proves disappointing.
If investment within the Australian economy shows signs of diminishing this is likely to further undermine confidence in the domestic outlook, giving the RBA additional incentive to remain on hold.
AUD exchange rates remain vulnerable to shifts in wider market sentiment, meanwhile, with the latest Chinese manufacturing PMI set to provoke jitters.
Any softening within the world’s second largest economy would diminish the appeal of the commodity-correlated Australian Dollar, raising the risk of a further decline in base metal prices.
On the other hand, continued expansion of the Chinese manufacturing sector could see the GBP AUD exchange rate return to a sharper downtrend.