Stronger UK GDP Failed to Boost Pound Australian Dollar (GBP/AUD) Exchange Rate
Even in the absence of any fresh Australian data the Pound to Australian Dollar (GBP/AUD) exchange rate struggled to make any particular headway ahead of the weekend.
While the UK fourth quarter gross domestic product data surprised to the upside this failed to significantly boost the Pound (GBP) during Friday’s European session.
Investors were still somewhat encouraged to find that GDP growth had picked up 0.5% on the quarter, even though this still lags behind the growth rate of other G7 nations.
As James Smith, Developed Markets Economist at ING, commented:
‘In the short-term at least, we see few catalysts for a further acceleration in UK growth. The outlook for consumer spending looks relatively bleak, even though the rate of inflation is starting to ease. Consumer confidence is the lowest since 2013, which is pretty stark when compared to the Eurozone and US, both of which are seeing sentiment at the highest levels since the early-2000s. And whilst an agreement is likely to be reached on a post-Brexit transition period this quarter, there is still plenty of Brexit-related uncertainty for firms to contend with.’
Persistently high levels of uncertainty regarding the domestic outlook, particularly as this GDP figure was only calculated with a fraction of the data, kept the GBP/AUD exchange rate under pressure.
US Trade Commentary Benefits Australian Dollar (AUD) Exchange Rates
The relative softness of the US Dollar (USD) continued to limit the strength of the GBP/AUD exchange rate, boosting the commodity-correlated Australian Dollar.
Although the more belligerent message on trade adopted by the Trump administration has encouraged concerns over the prospect of a trade wars this failed to limit market risk appetite.
A weaker-than-expected US annualised gross domestic product reading added to the appeal of the Australian Dollar overnight, further diminishing the odds of an imminent Federal Reserve interest rate hike.
After their recent run of gains, though, AUD exchange rates look rather vulnerable to any shift in investor sentiment.
Confidence in the outlook of the Australian economy itself still remains limited, given the rather mixed picture painted by recent domestic data.
Improved NAB Business Confidence Forecast to Strengthen AUD Rates
Tuesday’s NAB business confidence index for December could provoke further weakness for the GBP/AUD exchange rate, though, with sentiment forecast to have picked up significantly.
If the index does jump from 6 to 12, as forecast, this would give the Australian Dollar additional support, allaying some doubts over the economic outlook.
Greater confidence amongst businesses may point towards an improvement in wider economic conditions, although this is unlikely to be enough to alter the policy stance of the Reserve Bank of Australia (RBA).
Demand for the Pound, meanwhile, looks set to weaken in the absence of any fresh UK data releases at the start of the week.