US Government Shutdown Pushes Pound to Australian Dollar Exchange Rate Higher
The Pound to Australian Dollar (GBP/AUD) exchange rate climbed on Monday morning as investors reacted to news of a US government shutdown following disagreements on funding in Congress.
Concern that the shutdown could impact global growth if it continues for too long undermined demand for higher-risk currencies like the Australian Dollar.
However, as the shutdown isn’t expected to last for an extended period of time, GBP/AUD gains have been limited.
Pound (GBP) Exchange Rates Supported by Hopes for ‘Soft Brexit’
Last week Sterling (GBP) was able to hold its ground against the Australian Dollar (AUD) despite some disappointing UK ecostats.
UK retail sales fell short of expectations in every print in December. The month-on-month figure was forecast to come in at -0.6% but instead tumbled to -1.5%.
However, as investors have become slightly more confident that UK-EU negotiations will work towards a ‘soft Brexit’ rather than a ‘hard Brexit’, the British currency has remained relatively buoyant over the past week.
On top of this, hawkish comments made by Bank of England (BoE) policymaker Michael Saunders caused speculation that some BoE officials will vote for higher UK interest rates at some point this year.
Australian Dollar (AUD) Limits Losses amid Strong Australian Job Report
The Australian Dollar held fairly steady against the Pound last week, with investors impressed by the latest forecast-beating Australian consumer confidence and job market figures.
Australia’s December job market report did see the key unemployment rate unexpectedly worsen from 5.4% to 5.5%, but this was largely caused by an unexpected jump in the labour participation rate, from 65.5% to 65.7%.
The improvement in the employment figure was impressive, coming in at 34.7k as opposed to the forecast 9k. Overall, it was a solid report to round off an impressive year for Australia’s job market.
Pound to Australian Dollar (GBP/AUD) Forecast: Key UK Data in Focus
Sterling is more likely to drive Pound to Australian Dollar (GBP/AUD) exchange rate movement this week.
Sterling could gain if upcoming UK data impresses, especially if investors remain hesitant about buying risk-correlated currencies like the Australian Dollar.
Tuesday will see the publication of Britain’s December public sector net borrowing report, but Wednesday’s UK job market report will be the more influential release.
Investors will be paying close attention to Britain’s wage growth stats. If UK wage growth beats expectations it could help reduce the current pay squeeze and give the Bank of England (BoE) reason to consider increasing interest rates in the not too distant future.
The Australian Dollar, on the other hand, is likely to respond primarily to risk-sentiment and commodity news given the lack of key domestic data due for publication in the coming days.