Update 2: Reports Suggesting European Parliament Would Prefer a Soft Brexit Boosts Pound to Australian Dollar Exchange Rate
After slipping earlier in the day on anticipation for Australian wage data, the Pound to Australian Dollar (GBP/AUD) exchange rate advanced and spent much of the afternoon above the week’s opening levels.
The Pound (GBP) saw stronger demand following reports that the European Parliament was preparing a detailed resolution calling for Britain to have more privileged access to the EU single market.
This boosted market hopes that parts of the EU would push for a ‘soft Brexit’ in negotiations in a break from the usually strict position of EU chief negotiator Michel Barnier.
Update 1: Reserve Bank of Australia (RBA) Meeting Minutes Help Push Pound to Australian Dollar Exchange Rate Lower
The Reserve Bank of Australia (RBA) published its latest meeting minutes report during Tuesday’s Asian session, which left Pound to Australian Dollar (GBP/AUD) exchange rate investors anxiously anticipating Wednesday’s upcoming wage stats.
While the bank’s report was largely unsurprising, taking a cautious and neutral tone on Australia’s economic outlook, the bank played up the importance of wage growth just a day ahead of Australia’s Q4 wage price report.
As the Pound (GBP) has been weighed down by Brexit uncertainties since markets opened this week, Australian wage data anticipation has pushed GBP/AUD lower.
GBP/AUD Exchange Rate Forecast: Investors Anticipate Important Wage Data
After mixed movement throughout last week’s trading session, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate remained relatively flat on Monday morning.
GBP/AUD fluctuated between interbank lows of 1.75 and highs of 1.78 last week, but ultimately the Pound only managed to edge higher by around a fifth of a cent, from the interbank level of 1.76 to 1.77.
Movement between GBP/AUD remained tight on Monday amid a lack of any new drivers in markets. Investors instead awaited key UK and Australian ecostats due over the coming days.
Wage growth, from both Britain and Australia, is likely to be particularly influential this week. Both the Bank of England (BoE) and Reserve Bank of Australia (RBA) have said that stronger wage gains would improve the outlook of their economies.
Pound Sterling Gains Limited as UK Retail Sales Flatline
The British Pound (GBP) ultimately edged higher against the Australian Dollar (AUD) last week, but this was due to mixed Australian Dollar demand and greater hopes for a ‘soft Brexit’. Recent UK data has been too mixed to support Pound trade by itself.
Friday saw the publication of Britain’s January retail sales results, which fell short of expectations in every major print.
Retail sales were forecast to come in at 0.5% month-on-month but only rose from -1.4% to 0.1%. The yearly figure was similarly disappointing and failed to meet the forecast 2.6%, only edging higher from 1.5% to 1.6%.
The data caused concern among analysts that British consumers were hesitating to spend due to the ongoing pay squeeze. With the pay squeeze in focus again, markets are greatly anticipating upcoming UK wage data.
Sterling still benefitted slightly on Friday from news that German Chancellor Angela Merkel believed a special post-Brexit deal between the UK and EU was possible.
Australian Dollar (AUD) Movement Largely Unchanged Following Unsurprising Jobs News
Last Thursday saw the publication of Australia’s January jobs market results. The labour market had repeatedly outperformed expectations throughout 2017, and investors are hoping the trend will continue in 2018.
The data did confirm that the job market saw solid overall performance in January, but there was nothing surprising in the print.
The key unemployment rate improved from 5.6% to 5.5%, as expected, with the number of new jobs coming in at 16k, close to the forecast 15k.
Overall, the data had little influence on the Australian Dollar outlook. The ‘Aussie’ was also held back by stronger demand for the US Dollar (USD) on Friday.
Pound to Australian Dollar (GBP/AUD) Forecast: Key Wage Stats in Focus
The Pound to Australian Dollar (GBP/AUD) exchange rate outlook could be influenced by UK and Australian wage growth data in the coming days, with both figures having the potential to impact central bank bets.
While Tuesday will see the publication of the Reserve Bank of Australia’s (RBA) latest meeting minutes report, Australian Dollar investors are more likely to await Wednesday’s wage data – especially if the bank asserts the importance of wage pressures.
Wednesday could be the most influential session this week for GBP/AUD investors, as Australian Q4 wage data will be published during the Asian session, followed by Britain’s December jobs market results during the European session.
If Australia’s wage price data beat expectations in Q4 2017, it could boost market hopes that Australian price pressures are improving. This would lead to higher RBA interest rate hike bets and the Australian Dollar would strengthen.
If UK wage data beats expectations, markets may become more confident that the ongoing UK pay squeeze could end sooner than previously expected. It would also boost Bank of England (BoE) interest rate hike bets.