The GBP/AUD exchange rate recovered from its fortnightly low in spite of a stronger Chinese manufacturing PMI reading.
Last Week: UK Car Production Decline Erodes Confidence in Economic Outlook
A sharper-than-expected decline in October’s UK car production figure left the GBP/AUD exchange rate on the back foot, highlighting the pressure coming to bear on the manufacturing sector.
Although third quarter Australian private capital expenditure showed a more significant contraction than forecast this was not enough to drag the Australian Dollar down against its rival.
With markets still largely optimistic that an end to the Covid-19 crisis is just over the horizon support for the risk-sensitive Australian Dollar remained elevated.
Signs of strength in the latest Chinese economic data also helped to shore up AUD exchange rates, given that the Australian Dollar commonly functions as a market proxy for sentiment towards the world’s second largest economy.
Three Things to Watch out for This Week
1. Reserve Bank of Australia Interest Rate Decision
The mood towards the Australian Dollar could easily sour on Tuesday with the Reserve Bank of Australia’s (RBA) policy announcement.
While no change in interest rates looks likely at this stage any alteration to monetary policy or expression of anxiety over the economic outlook could weigh heavily on AUD exchange rates.
2. Australia Gross Domestic Product
However, some confidence in the Australian economy could emerge on the back of the third quarter gross domestic product report.
As long as growth proves positive on the quarter, helping to balance out some of the second quarter’s decline, this could see the GBP/AUD exchange rate stumble once again.
3. Australia Balance of Trade
With forecasts pointing towards a widened trade surplus in October the mood of AUD exchange rates may remain bullish on Thursday.
Evidence of trade conditions continuing to improve, in spite of the impact of ongoing global Covid-19 disruption, may offer the Australian Dollar a solid leg up against its rivals.
GBP/AUD Outlook
Australian data releases look set to dominate the outlook of the GBP/AUD exchange rate this week, with the antipodean currency particularly vulnerable to any fresh RBA dovishness.