Renewed confidence in the prospect of a viable Covid-19 vaccine saw the GBP/AUD exchange rate come under pressure as market risk appetite picked back up.
Last Week: Underwhelming UK GDP Data Limit Pound Appeal
The UK’s third quarter gross domestic product report did little to improve the appeal of the Pound last week, even though quarterly growth delivered a record high.
Investors were more concerned by signs of underlying weakness in the data, especially as September’s monthly growth rate slowed notably on the month from 2.2% to 1.1%.
All in all, coupled with impending deadline for a Brexit draft deal, this left the GBP/AUD exchange rate on a weaker footing ahead of the weekend.
However, as the initial bout of market optimism over the US presidential election result and Pfizer’s vaccine announcement faded this limited the Australian Dollar’s ability to push higher against its rival.
Three Things to Watch out for This Week
1. Reserve Bank of Australia Meeting Minutes
The mood towards the Australian Dollar could well sour once again if the Reserve Bank of Australia’s (RBA) latest set of meeting minutes prove dovish in nature.
As long as policymakers leave the door open to the possibility of future policy action AUD exchange rates may experience a fresh bout of selling pressure.
2. UK Consumer Price Index
Support for the Pound could pick up, on the other hand, as long as October’s UK consumer price index shows an uptick on the year.
Evidence that inflationary pressure saw an increase at the start of the fourth quarter would give the Bank of England (BoE) less cause for dovishness, limiting the downside pressure on the Pound.
3. Australia Unemployment Rate
Worries over the health of the Australian economy could pick up on the back of October’s labour market data, with forecasts pointing towards a rising unemployment rate.
If unemployment jumps to 7.2% as anticipated this may drive the Australian Dollar lower across the board, with a weaker labour market boding ill for the wider economic outlook.
If the RBA meeting minutes and Australian labour market report boost the odds of further policy action to come this could offer the GBP/AUD exchange rate a solid rallying point.