Pound to Australian Dollar (GBP/AUD) Exchange Rate Forecast to Extend Losses if Australian Confidence Data Impresses

Update: Pound to Australian Dollar (GBP/AUD) Exchange Rate Nears Monthly Lows on Risk-Sentiment

Slightly weaker demand for risk-correlated currencies only led to a limited boost in demand for the Pound to Australian Dollar (GBP/AUD) exchange rate on Monday.

GBP/AUD dipped below the week’s opening levels at the time of writing, as risky currencies remained appealing and Sterling (GBP) lacked the drive to hold a recovery.

Strong US jobs data at the end of last week, as well as lightening fears over the possibility of a ‘trade war’, left investors more willing to buy high yielding risky currencies like the Autralian Dollar (AUD).

However, AUD movement could still be limited as investors anticipate key Australian data due in the coming days.

Pound to Australian Dollar Exchange Rate Losses Limited by Market Risk Sentiment

While stronger demand for risk-correlated currencies dragged the Pound to Australian Dollar (GBP/AUD) exchange rate lower last week, this also means the pair could quite easily recover if risky currencies became unappealing again.

Last week saw GBP/AUD open at the interbank level of 1.777. While the pair briefly touched a high of 1.788, it then spent most of the week sliding before closing at 1.763.

GBP/AUD briefly dipped to a monthly low on Monday morning, but weaker risk sentiment made it easier for the pair to recover.

Investors have remained anxious about the Donald Trump’s plans to meet with North Korea’s leader, as North Korea has yet to respond to news that the US President had accepted the invitation.

Demand for risky currencies like the Australian Dollar (AUD) rose on Friday when the invitation was initially accepted, but the lack of a North Korean response, as well as objections from the US Republican Party, have weighed on risk-sentiment.

The Republican Party has said that North Korea denuclearisation must be a prerequisite to any potential meeting with the isolated nation. This has caused market concerns that meeting the plans could fall through.

However, if Australian data due for publication in the coming days impresses investors, it could give them more domestic reasons to buy the ‘Aussie’ and this could help the currency to sustain gains against Sterling (GBP).

Brexit Uncertainty Leaves Pound (GBP) Exchange Rates Fluctuating

Last week’s Brexit news had little lasting effect on the Pound, as it only served to give investors a mixed view on how UK-EU negotiations were unfolding.

European Council President Donald Tusk stated that the UK government’s aim for a bespoke Brexit deal was not possible, as the UK plans to leave the EU customs union and single market.

However, the UK chancellor Philip Hammond did not appear concerned by Tusk’s stance, claiming it was merely a negotiation stance that could be worked through.

Hammond expressed confidence that a UK-EU post-Brexit trade deal could still include an agreement on financial services trade, for example.

As investors anticipate more major developments in Brexit negotiations, the focus has briefly turned to UK fiscal policy ahead of the UK chancellor Philip Hammond’s Spring Statement on Tuesday.

Pound to Australian Dollar (GBP/AUD) Forecast: Australian Data Could Drive ‘Aussie’

The Pound to Australian Dollar (GBP/AUD) exchange rate could recover much of last week’s losses if markets lose appetite for risk-correlated currencies, although if upcoming Australian data impresses it could bolster AUD support.

Tuesday will see the publication of Australia’s February business confidence survey from NAB, as well as Westpac’s March consumer confidence survey.

Signs of stronger confidence in Australia would boost hopes that consumer activity will continue to improve. The Reserve Bank of Australia (RBA) has been concerned about Australian consumer activity in recent months.

Australian Dollar investment may also be influenced by January home loans data. Later in the week, consumer inflation expectations data will be published as well as the latest RBA bulletin.

The Pound could see another week of mixed or limp performance if Tuesday’s UK Spring Statement from the Treasury disappoints, or if Brexit developments offer fresh concerns about the process.

UK the chancellor is likely to offer an update on UK fiscal policy and the latest economic forecasts during the Spring Statement.

Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard