Anticipation for Australian Data Weighs on Australian Dollar to Pound (AUD/GBP) Exchange Rate
While the Reserve Bank of Australia (RBA) took a cautiously optimistic tone during its March policy decision, the Australian Dollar to Pound (AUD/GBP) exchange rate’s recovery was limited and the pair slipped again during Tuesday’s European session.
Could AUD/GBP see losses this week? The pair edged higher to the level of 0.5625 last week, but since markets opened on Monday the pair has already touched on a three-week-low of 0.5588.
The pair trended near the level of 0.5600 at the time of writing after failing to sustain a recovery from Monday’s low.
Market demand for risk-correlated currencies like the Australian Dollar (AUD) was slightly stronger on Tuesday, as concerns about the US sparking a ‘trade war’ cooled.
Despite this, market anticipation for key Australian ecostats such as growth and trade data due in the coming days have made investors hesitant to buy the ‘Aussie’.
Pound (GBP) Exchange Rates Boosted by UK Services Results
The Pound (GBP) has been weakened by Brexit uncertainties over the past week, but despite this the British currency has been able to advance against a broadly weak Australian Dollar so far this week.
Market demand for Sterling was bolstered slightly on Monday by Markit’s last round of UK February PMI stats, which beat expectations despite disappointing manufacturing and construction data last week.
Markit’s UK services PMI was forecast to have improved just slightly, from 53 to 53.3, but instead advanced to 54.5. As a result, the composite figure also climbed higher than expected – from 53.5 to 54.5.
However, Sterling’s gains were limited. Investors remained concerned about persistent Brexit uncertainties.
Monday comments from UK Chancellor Philip Hammond suggesting the UK government would continue to prepare for a ‘no deal’ Brexit (or a ‘hard Brexit’) even if a transition period is agreed made investors hesitant to buy the Pound much.
Australian Dollar (AUD) Little Affected by Reserve Bank of Australia (RBA) Stance
While the Reserve Bank of Australia (RBA) deviated slightly from its usual tone during its March policy decision, the bank’s comments did not have a significant impact on the Australian Dollar or give AUD investors much reason to buy the currency.
Notably, the bank showed confidence that Australian wage growth is likely to continue improving in the coming quarters. The bank avoided bringing up the US Presidency’s recent protectionist comments and actions.
However, the bank’s tone also suggested that the bank was likely to leave Australian interest rates frozen for at least the remainder of 2018, disappointing some of the more hawkish Australian Dollar investors.
Market risk-sentiment improved on Tuesday as ‘trade war’ fears eased, but the Australian Dollar was unable to capitalise due to the bank’s cautious tone on monetary policy and anticipation for upcoming Australian ecostats.
Australian Dollar to Pound (AUD/GBP) Forecast: Australian Growth in Focus
Wednesday will see the publication of some key Australian data which could boost demand for the Australian Dollar to Pound (AUD/GBP) towards the end of the week if it impresses.
Investors have hesitated to buy the Australian Dollar in anticipation of Wednesday’s Q4 Australian Gross Domestic Product (GDP) report.
Australian growth is forecast to have remained at 0.6% quarter-on-quarter, but slowed from 2.8% to 2.5% year-on-year.
If Australian growth beats expectations, the Australian Dollar could strengthen on hopes that Australia’s economy has been performing better than expected. This could help AUD/GBP recover.
Thursday’s Australian trade results from January may also influence Australian Dollar movement if it surprises investors.
As for the Pound, Brexit developments will continue to drive Sterling movement in the coming days. UK trade and production results from January, due Friday, could influence market demand for the British currency too.