Pound Australian Dollar Exchange Rate Strikes Quarterly Best as Australia’s Trade Surplus Falls

Pound Australian Dollar Exchange Rate Surges on Joe Biden’s Infrastructure Plans 

Despite some stronger than expected Australian retail stats, the Pound Australian Dollar (GBP/AUD) exchange rate surged at the end of March. With many economies closed to observe a public holiday tomorrow, currencies will be driven by market sentiment in the coming days. 

Since opening this week at the interbank level of 1.80, GBP/AUD spent most of the week seeing fairly narrow and mixed movement. 

After dipping in the middle of the week, GBP/AUD experienced a late-week surge in demand. GBP/AUD soared all the way to the interbank level of 1.82 and touched on a quarterly best, amid highs not seen since late 2020. 

At the time of writing, GBP/AUD is falling back slightly from those highs but still trends strong in the interbank region of 1.82. 

Pound (GBP) Exchange Rates Strengthen on UK Reopening Hopes 

So far, Britain’s gradual economic reopening from its third coronavirus lockdown has gone well. The nation started to allow groups to meet outside last week. 

Markets are now looking ahead to later in April, when many more shops will reopen from the lockdown.  

Optimism around Britain’s potential to recover from the pandemic are among the primary causes of Pound strength over the past month or so. As momentum gains, Sterling (GBP) remains appealing. 

Even some mixed UK data this week has been ignored in favour of the optimistic outlook. 

Today’s UK manufacturing PMI from Markit beat projections, which further supported Sterling strength. 

Australian Dollar (AUD) Exchange Rate Hit by Joe Biden’s Infrastructure Plans despite Strong ‘Aussie’ Data 

Today’s Australian retail sales results beat forecasts. The data showed that retail sales only contracted at –0.8%, rather than the expected loss of –1.1%. 

According to Analysts at Westpac: 

‘The final Feb release will include more granular detail that is likely to highlight the impact of ‘mini-lockdowns’ during the month in Vic and WA – sales up marginally across other states’ 

While the data beat forecasts though, it was still not a particularly positive print. This, as well as news that Australia’s trade surplus had unexpectedly dropped, made AUD more sensitive to shifts in global markets. 

Last night, US President Joe Biden made a speech on a $2 trillion infrastructure package. His plans to stimulate the US economy caused investors to pile into the US Dollar (USD), which in turn weakened the risk and trade-correlated Australian Dollar. 

Pound Australian Dollar (GBP/AUD) Exchange Rate Awaits Reserve Bank of Australia (RBA) 

With this week’s UK and Australian data published, Pound and Australian Dollar investors are likely to react to shifts in market sentiment for now. 

If investors remain hesitant to take risks, GBP/AUD could continue to trend near recent highs. 

On the other hand though, some analysts believe that improving coronavirus recovery hopes will ultimately leave risk and trade-correlated currencies higher again. This could support the ‘Aussie’ and even push GBP/AUD lower again soon. 

Next week’s UK economic calendar will be a little quieter. The only notable UK data of the week will be Markit’s final March services and composite PMI results. 

The biggest focus for GBP/AUD investors next week will be the Reserve Bank of Australia’s (RBA) April policy decision, set for Tuesday. If the bank remains dovish the Australian Dollar may struggle to mount an advance. 

Hopes over Britain’s continued economic reopening will remain a key factor in the Pound Australian Dollar (GBP/AUD) exchange rate as well. 

Josh Jeffery

Contact Josh Jeffery