Pound to Australian Dollar (GBP/AUD) Exchange Rate Fails to Hold Gains as Bank of England (BoE) Bets Fall
UPDATE 15:26 BST: As investors digested the latest UK job market results, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate shed its morning gains.
Several analysts and economists have argued that the data indicated UK price pressures were fading, while some argued that the Bank of England (BoE) was now less likely to hike UK interest rates in August.
This weighed on Pound sentiment and GBP/AUD trended nearer its weekly lows again on Tuesday afternoon.
Pound to Australian Dollar (GBP/AUD) Exchange Rate Investors Await Further Data and Political Developments
As the anticipated summit between the US and North Korea wrapped up, markets turned their focus back towards Central Bank speculation and data.
Demand for risk-correlated currencies like the Australian Dollar (AUD) was a little stronger, but GBP/AUD trended above its lowest levels due to rising UK employment.
GBP/AUD Falls Overnight after ‘Successful’ US/North Korea Summit
UPDATE 09:53 BST: The Australian Dollar (AUD) and other risk- correlated currencies shot higher overnight, pushing the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate lower on Tuesady morning.
GBP/AUD currently remains well above last week’s low of 1.7398, and it has already fallen over half a cent from the opening level at the beginning of the week of 1.7634.
Pound to Australian Dollar Exchange Rate (GBP/AUD) Trends Lower as UK Economic Concerns Hit Headlines
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate was unable to recover from this morning’s losses, and at the time of writing continued to trend in the interbank region of 1.75.
Sterling (GBP) demand remained weak throughout the day, as NIESR’s UK growth estimate for the three months into May also fell short of forecasts.
Rather than showing any notable rebound in growth, the estimate came in at 0.2% rather than climbing from 0.1% to 0.3% as forecast.
Pound to Australian Dollar Exchange Rate (GBP/AUD) Tumbles as UK Production Stats Worsen UK Economic Concerns
Investors hoping that Britain’s economy would remain solid enough to support some tighter monetary policy from the Bank of England (BoE) were disappointed by UK data on Monday, causing the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate to drop.
Despite solid Australian data, GBP/AUD recovered from its lows last week due to a lack of demand for risky trade-correlated currencies like the Australian Dollar (AUD).
GBP/AUD’s interbank level briefly dropped to a multi-month low of 1.73, but closed and opened the week at the level of 1.76. At the time of writing, the GBP/AUD interbank level was around 1.75, due to some very underwhelming UK data.
Monday saw the publication of Britain’s production and trade stats from April, and many of the figures were much worse than analysts had predicted. In fact, UK manufacturers suffered the biggest monthly fall in over five years.
As a result, GBP/AUD was trending lower at the time of writing despite global trade jitters leaving risk-correlated currencies like the Australian Dollar less appealing.
Pound (GBP) Exchange Rates Tumble as UK Production Contracts
While not this week’s most influential results, Monday’s UK trade and production figures were disappointing enough to have a negative impact on the Pound (GBP) outlook.
April’s UK trade balance was forecast to have lightened from £-3.091b to £-2.5b, but instead deepened from a revised £3.22b to £-5.28b.
Production stats fell well short of forecasts and unexpectedly contracted in many key prints.
UK manufacturing was forecast to come in at 0.3% month-on-month, but slumped to -1.4%. Similarly, industrial production failed to reach the forecast 0.2% and contracted at -0.8%.
Construction output contracted sharply in both prints, coming in at a dismal -6.6% in the Q1 print and -3.3% in the April print.
According to Rob Kent-Smith from the Office for National Statistics:
‘Manufacturing fell in the three months to April with electrical machinery and steel for infrastructure projects seeing reduced production. International demand continued to slow and the domestic market remained subdued.’
Australian Dollar (AUD) Pressured by Global Trade Jitters
Last week saw the world’s biggest advanced economies meet for the 2018 G7 summit in Canada – but the summit didn’t do much to make investors more optimistic about unity between the top nations.
US President Donald Trump continued to distance US trade policy from allies, standing firm on his protectionist position.
This left markets anxious that the US could still spark a global trade war, or that US trade stances could have a negative impact on economies that rely heavily on commodity trade – such as Australia’s economy.
As Australia is a nation with a heavy reliance on trade ties with the US and China, market demand for the risky Australian Dollar (AUD) has been limited amid the recent trade uncertainty.
The Australian Dollar has seen domestic support from surprisingly strong Australian retail and growth stats however. This helped the ‘Aussie’ to push GBP/AUD lower on Monday.
Pound to Australian Dollar (GBP/AUD) Forecast: Key Jobs Market Reports This Week
The Pound to Australian Dollar (GBP/AUD) exchange rate is likely to be driven by UK and Australian job market results this week, as well as other key ecostats due in the coming days.
Britain’s April unemployment rate and wage growth figures will be published on Tuesday morning, with Australia’s employment figures following on Thursday.
These reports could influence GBP/AUD trade and boost the respective currencies if they impress. Stronger UK wage growth may make investors more confident that Britain’s economy could sustain an interest rate hike from the Bank of England (BoE) for example.
Plenty of other stats could influence GBP/AUD throughout the week, including UK Australian consumer confidence and UK inflation on Wednesday, as well as UK retail sales results on Thursday.
With Britain’s ecostats mixed recently and investors once again uncertain about whether or not the Bank of England will be able to hike UK interest rates this year, Sterling (GBP) could recover if upcoming stats beat forecasts.
Strong UK wage, inflation or retail data could also bolster the Pound to Australian Dollar (GBP/AUD) exchange rate outlook.