Pound to Australian Dollar Exchange Rate Recovery Limited as Investors Anticipate Australian Inflation Results
UPDATE: Since touching a high on Tuesday morning, the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate has slipped as investors anticipate key Australian inflation data due on Wednesday.
Tuesday saw the publication of the latest business optimism and factory data from the Confederation of British Industry (CBI), but these were mixed and did little to help the Pound (GBP) to hold its gains.
Business confidence lightened slightly from -4 to -3 in the Q3 print, while July’s industrial trends orders figure slipped from 13 to 11 rather than the expected 9.
Pound to Australian Dollar Exchange Rate Recovery Continues as Chinese Markets Weaken AUD
UPDATE: Investors continued to buy the cheap Pound (GBP) on Monday, and the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate’s recovery was bolstered by weak Chinese market news.
As China is Australia’s biggest trade partner, the Australian Dollar (AUD) became unappealing amid news that the Chinese Yuan (CNY) continues to fall against the US Dollar (USD).
Despite US President Trump’s US Dollar criticism, the Yuan remains weak, which has worsened concerns that the US-China trade conflict will negatively impact Australia’s economy.
For now, Australian Dollar investors are highly anticipating Wednesday’s Australian inflation results.
Pound to Australian Dollar Exchange Rate Rebound Limited by Trump Comments
Investors continue to boost the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate back from its lowest levels on Monday, but its gains have been limited as the Australian Dollar (AUD) continues to benefit from weakness in the US Dollar (USD).
After opening last week at the interbank level of AU$1.78, GBP/AUD spent most of last week tumbling and even touched as low as the region of AU$1.75 on Thursday morning. This was the worst GBP/AUD level in over a month.
Towards the end of the week, investors bought GBP/AUD back from its cheapest levels and the pair ended the week in the interbank region of AU$1.76.
At the time of writing on Monday, GBP/AUD had continued to climb and is trending in the region of AU$1.77 – although the pair remains around a cent lower than last week’s opening levels.
Sterling (GBP) and the ‘Aussie’ have both benefitted from the latest bout of US Dollar (USD) weakness, but this also means that the Pound to Australian Dollar exchange rate’s gains have been limited. Investors are now awaiting key Australian data over the coming days.
Pound (GBP) Exchange Rates Bought from Cheapest Levels
While last week’s UK political and economic developments worsened concerns that Britain could face a worst-case scenario ‘no deal’ Brexit, a number of smaller factors have supported a Pound (GBP) recovery since.
Economic concerns continue to weigh on the Pound, but as the British currency hit multi-month lows versus some of its most major rivals, investors have been buying the currency back from its cheapest levels.
On top of this, the Pound has benefitted from a lack of particularly strong demand for any rival currencies.
The US Dollar (USD) has been weaker since last week on concerning comments from US President Donald Trump, while other currencies have been weighed by trade jitters or domestic economic concerns of their own.
Australian Dollar (AUD) Exchange Rates Benefit from Trump Comments
Some controversial comments made by US President Donald Trump towards the end of last week regarding the US Dollar (USD) and the Federal Reserve led to a market turnaround which ended up supporting the previously weak Australian Dollar (AUD).
The Reserve Bank of Australia (RBA) has recently expressed concern over the potential impact that US trade protectionism and a US-China trade war could have on Australia’s economy.
Investors don’t expect the RBA to make any changes to monetary policy for at least a year, and this bearish outlook, as well as trade war jitters, are keeping pressure on the Australian Dollar.
Nevertheless, investors bought the risky Australian Dollar and other currencies that benefit from lower US bond yields last week, when US President Donald Trump criticised the strength of the US Dollar and the Federal Reserve’s policy of continuous US interest rate rises.
The news caused Chinese markets to rebound, dragging the risky Australian Dollar higher with it.
On top of this, Australia’s latest job market data from June beat forecasts and gave the ‘Aussie’ a little extra domestic support towards the end of last week.
This was not enough to halt a GBP/AUD recovery from its cheapest levels, however.
Pound to Australian Dollar (GBP/AUD) Forecast: Australian Inflation in Focus
One of the reasons for the Australian Dollar’s (AUD) persistent weakness is the low Reserve Bank of Australia (RBA) interest rate hike bets. As a result, Australian Dollar demand could surge if Australian inflation surprises to the upside.
Australia’s Q2 Consumer Price Index (CPI) inflation figures will be published during Wednesday’s Asian session and are expected to show solid improvements from the previous results.
Australian inflation is forecast to have risen slightly, from 0.4% to 0.5%, quarter-on-quarter. The yearly figure is expected to have risen from 1.9% to 2.2%.
If the inflation data beats forecasts, the market view of Australian price pressures may improve and RBA interest rate hike bets could rise. This would support further AUD strength and potentially push GBP/AUD lower.
Australian export data due on Thursday and UK business and factory stats from the CBI on Tuesday and Wednesday could also influence the Pound to Australian Dollar (GBP/AUD) exchange rate this week.