Pound to Australian Dollar (GBP/AUD) Exchange Rate at Half-Month-Best Ahead of Fed

Pound to Australian Dollar Exchange Rate Reaches Half Month High

Update 16:45 BST 29/07/2020:

Despite a lack of domestic support for the Pound (GBP), the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate climbed today. Investors kept buying Sterling as it benefitted from US Dollar (USD) weakness.

The US Dollar (USD) has been falling ahead of this evening’s anticipated Federal Reserve decision. As markets increasingly see the US coronavirus outlook as worse than Britain’s, Sterling is gaining more on US Dollar losses.

At the time of writing, GBP/AUD trended near an interbank high of 1.81. This was the best level for GBP/AUD in half a month.

The pair could see a shift in movement tomorrow. This depends on how markets react to this evening’s Federal Reserve news.

(Originally published 10:09 BST 29/07/2020)

Pound to Australian Dollar Exchange Rate Stuck Around Week’s Opening Levels

Expectation for a more dovish Federal Reserve today is keeping risk-sentiment buoyed, and keeping pressure on the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate. Today’s Australian data was also fairly impressive.

Market risk aversion last week ultimately left GBP/AUD higher. The pair rebounded from its worst levels in a year, 1.77, to trend closer to the interbank level of 1.80 at the end of the week.

This week’s movement has been narrow and mixed so far, with investors hesitant to make big movements on either currency. While GBP/AUD has been unable to hold its overnight highs, it still hovers above the week’s opening levels at the time of writing.

Britain’s coronavirus and Brexit outlooks continue to weigh on the British currency’s appeal. UK data may not be influential but next week’s Bank of England (BoE) policy decision will be anticipated.

Pound (GBP) Exchange Rates Weak as Outlook Filled with Uncertainties

The Pound (GBP) has been attempting further advances since markets opened this week. It has been able to avoid losses against the Australian Dollar (AUD) as market risk-sentiment has weakened.

However, the Pound still lacks the drive needed to sustain notable gains. Britain’s coronavirus and Brexit outlooks are still filled with uncertainty.

Plus, while recent UK data has been strong, it has not been enough to notably improve Britain’s outlook.

According to Jeremy Stretch, Analyst at CIBC Capital Markets, the data may appear more impressive than it is following previous reports:

‘Of course, the data is distorted by coming from such a low base. But looking ahead, we see some headwinds against this trend continuing. A rising tide of job losses as government support is progressively withdrawn risks an economic disappointment and sterling remaining on the defensive.’

Australian Dollar (AUD) Exchange Rates Avoid Losses but Data Still Concerns

Investors have been hesitant to sell the Australian Dollar (AUD) much this week so far. This is due to the currency’s recent appeal among risk-correlated currencies, and hopes for Australia’s economic resilience amid the coronavirus pandemic.

However, recent Australian data, while coming in slightly better than forecast, is still not exactly goo news for the nation’s economy.

Australia’s key Q2 inflation rate was a slightly better than forecast, coming in at –1.9%. However, this was still Australia’s worst ever quarterly deflation. Analysts said it was partially due to free childcare in order to help combat the coronavirus pandemic.

The data made some analysts question the Reserve Bank of Australia’s (RBA) outlook. According to a note from Capital Economics:

‘That’s why we think the RBA’s forecasts for underlying inflation to reach 1.5% by mid-2022 are too optimistic. We therefore think the bank has more work to do.’

Pound to Australian Dollar (GBP/AUD) Exchange Rate Awaits More Australian Data

Australian data has continued to be fairly strong, but it has not been enough to keep markets optimistic about Australia’s resilience to the coronavirus pandemic.

Amid a new lockdown in Australia’s State of Victoria, investors are looking for more signs that Australia’s economy will withstand further disruption. As a result, the coming week’s slew of Australian data will be closely watched.

Tomorrow will see the publication of Australia’s June building permits report, followed by PPI and private sector credit on Friday.

Then, next week will see the publication of Australia’s final July PMI indexes. These will give investors a more solid idea of how Australia’s economy is holding up.

Next week will also be a big week for central bank news.

Amid speculation that the Reserve Bank of Australia (RBA) has been too optimistic, the bank’s Tuesday policy decision could be a big focus for investors next week.

Of course, the Bank of England’s (BoE) August policy decision on Thursday could also influence the Pound to Australian Dollar (GBP/AUD) exchange rate.

Josh Jeffery

Contact Josh Jeffery