Pound Australian Dollar Exchange Rate Struggles to Sustain Gains amid Unsurprising UK Data

Pound Australian Dollar Exchange Rate Edges Higher but Gains Limited 

While the market’s Pound (GBP) outlook is optimistic, the Pound Australian Dollar (GBP/AUD) exchange rate has been unable to sustain a big gain this week. This is due to a lack of fresh Pound upside, as well as market sentiment supporting the Australian Dollar (AUD). 

GBP/AUD touched on a monthly low of 1.77 last week, before closing the week at the interbank level of 1.78. 

While GBP/AUD has been trending with an upside bias this week though, the pair’s gains have been limited. GBP/AUD did touch as high as 1.80 yesterday, but at the time of writing today the pair is trending nearer the interbank level of 1.79. 

PMI projections from April, for both the UK and Australia, could cause some late-week Pound to Australian Dollar exchange rate movement next week. 

Pound (GBP) Exchange Rates Limited by Political Uncertainty 

The Pound outlook remains broadly appealing, amid market expectations that Britain’s economy will recover from the coronavirus pandemic. 

However, much of this optimism has been priced into Sterling already. This week’s UK job market and inflation data was too mixed to notably boost the Pound’s support or appeal. 

On top of that, concerns are growing about the potential impact upcoming political events, including local elections and Scottish Parliamentary Elections at the beginning of May. According to Economists at Westpac: 

‘The process of reopening is also likely to impact the coming 6th May local elections and the critical Scottish Parliamentary election. Support for SNP has pulled back from its late 2020 heights as the Brexit trade deal was being finalised but remains high and so concerns over another Independence referendum may rattle markets into the 6th May elections, which is also when the BoE hold their next policy meeting.’ 

Australian Dollar (AUD) Exchange Rates Remain Appealing amid Rising Market Sentiment 

A dip in market risk-sentiment seen in the middle of the week was seemingly short-lived, as the Australian Dollar is once again seeing relatively resilient trade today. 

Investors of more risk and trade-correlated currencies, including the Australian Dollar, were impressed by yesterday’s Bank of Canada (BOC) policy decision. 

The BoC took a slightly hawkish tone, and investors are now speculating that the bank could be preparing to hike Canada’s interest rates as soon as next year. 

Tapas Strickland, Economist at National Australia Bank (NAB), said there is speculation that other central banks could follow: 

‘The key question for markets is does the BoC statement prove to be a watershed moment for central banks in which they revert back to outcomes-based guidance as the data improves and away from calendar-based guidance that was calibrated in the depths of the pandemic?’ 

This has led to higher demand for risk-correlated currencies like AUD. 

Pound Australian Dollar (GBP/AUD) Exchange Rate Awaits PMI Reports 

Tomorrow will round off the week with some more influential UK and Australian data, in the form of Markit’s April PMI projections. 

The PMI report will be the clearest indication so far of how the UK and Australian economies are performing amid the coronavirus pandemic this month. 

If PMIs come in higher than expected, it would indicate stronger than expected economic activity throughout the month. This could bolster the respective nation’s outlook and the appeal of the currency as well. 

Tomorrow will also see the publication of Britain’s latest retail sales report, which could also be influential to the Pound if it surprises investors. 

Of course, any notable shifts in the market’s appetite for risk taking could also influence the Pound Australian Dollar (GBP/AUD) exchange rate in the coming sessions. 

Josh Jeffery

Contact Josh Jeffery