Improved Consumer Confidence Supports Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate
UPDATE: A better-than-expected GfK consumer confidence index helped the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate to extend its gains further today.
Although the index remains firmly in negative territory at -13 the modest improvement seen on the month still offered support to the Pound.
The mood towards the Australian Dollar, meanwhile, soured sharply as rising geopolitical tensions and the early break-up of the US-North Korea summit prompted an increase in risk aversion.
Brexit Optimism Keeps GBP/AUD Exchange Rate at Four-Month High
UPDATE: Pound Sterling (GBP) continued to gain ground over the course of the day, climbing to a fresh four-month high against the Australian Dollar (AUD).
As analysts slashed the odds of a no-deal Brexit this encouraged investors to maintain an optimistic outlook towards the Pound, even though a significant degree of political uncertainty remains.
With opposition to Theresa May’s proposed deal appearing to soften this offered an additional boost to GBP exchange rates.
Bullish Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Shakes off Falling Business Confidence
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate continued to make solid gains this morning, even as UK business confidence showed fresh signs of deterioration.
Although the European Commission revealed that UK economic sentiment had fallen to its lowest level since June 2013 at the start of the year this failed to dent Pound Sterling (GBP).
Investors remain hopeful that the prospect of a no-deal Brexit has diminished in the wake of Theresa May’s concession to additional parliamentary votes and the possibility of an extended deadline.
While a significant degree of uncertainty over Brexit persists this was not enough to knock the Pound off its bullish trend, keeping the GBP/AUD exchange rate at its highest level since October.
Australian Construction Slump Dents Australian Dollar (AUD) Exchange Rates
Confidence in the Australian Dollar (AUD) took a fresh blow, meanwhile, as fourth quarter construction data showed a sharp contraction.
As construction slumped -3.1% this raised concerns over the outlook of the wider Australian economy, keeping AUD exchange rates on a weaker footing.
The mood towards the risk-sensitive Australian Dollar soured further as geopolitical tensions between India and Pakistan flared up, encouraging an increased sense of investor caution.
With the initial bout of optimism over a potential US-China trade breakthrough fading AUD exchange rates struggled to find support.
GBP/AUD Exchange Rate Vulnerable to Weaker UK Manufacturing PMI
Friday’s UK manufacturing PMI could see the GBP/AUD exchange rate return to a weaker footing, however, as forecasts point towards the sector losing further momentum on the month.
While the PMI is expected to remain above the neutral baseline of 50 which separates growth from contraction any decline may still weigh on the Pound.
As long as the UK economy continues to exhibit signs of weakness as the Brexit deadline approaches confidence in the domestic outlook looks set to deteriorate further.
Unless the manufacturing sector shakes off the sense of uncertainty gripping businesses the Pound is unlikely to hold onto its recent gains ahead of the weekend.
Chinese Manufacturing Slowdown to Weigh on Australian Dollar (AUD)
A fresh blow for the Australian Dollar could come on the back of Thursday’s Chinese manufacturing PMI, which is expected to remain within contraction territory.
Confirmation that the Chinese manufacturing sector continued to slow in February would leave AUD exchange rates on a weaker footing, thanks to the Australian Dollar’s position as a proxy for the strength of the Chinese economy.
Any general deterioration in market sentiment could also put pressure on AUD exchange rates, even though the Federal Reserve looks less likely to return to a monetary tightening cycle in the near future.
Even so, if the fourth quarter Australian private capital expenditure data shows a rebound on the quarter this may drag the GBP/AUD exchange rate down as confidence in the economic outlook improves.