The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate, while unsteady, has maintained strength after enjoying a near-year high last week.
Last Week’s Strong Australia Data Continues to Influence Australian Dollar (AUD) Strength Going Forward
After its near-year high against the Pound (GBP) last week, the Australian Dollar (AUD) has since managed to hold a position relatively near to that high point despite regular sharp dips. The pair currently moves at around -0.40% and trends in the region of 0.5243, despite hitting a high of 0.5276 on Monday.
The Pound’s continued weak period had it regularly fighting back against the ‘Aussie’ without lasting success. Mixed data and the economic world’s uncertainty on the future of Sterling after a potential ‘Brexit’ are large contributors to its past weakness.
The opposite is true for the Australian Dollar, with the currency benefiting from a series of successive positive events and news over the last week to continue its long-term uptrend against the Pound. Last week the AUD/GBP pair even reached the highest point it had enjoyed since the 24th of March 2015.
This bullish behaviour in the ‘Aussie’ is influenced by a number of vital factors, including the price of the nation’s primary export, iron ore. Iron ore experienced a price jump of 18.5% in a single day early last week, the highest day-on-day jump on record.
While the commodity trailed back down by 9% in the following days, prices are still well above the year’s opening levels and are estimated to remain strong until around June.
European Central Bank (ECB) Announcements and Confident Chinese Economy Improve Risk-Sentiment
The strength of the Australian Dollar was encouraged further by various global events last week. European Central Bank President Mario Draghi’s measures to stimulate the Eurozone economy and his further comments had a strong knock-on effect.
This increased the appeal of risks to investors who looked away from more reliable currencies into the risky commodity bloc. Of all commodity currencies the ‘Aussie’ was performing the strongest last week, adding even further to investor confidence in it.
Despite lower than forecast data releases from China last week, People’s Bank of China’s (PBoC) measures to keep the economy healthy also improved financial market sentiment towards China and its closest trading partners, like Australia.
While the ECB announcements did not considerably harm the Pound in general – it possibly even strengthened Sterling – the ‘Aussie’ was favoured more in its aftermath, owing to its position as a higher-yielding currency.
Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Forecast: Bank of England (BoE) Rate Decision to Influence Movements
After a period of being weakened by its political news, the Pound seems likely to experience a definitive movement in some form or another after this week’s Bank of England (BoE) interest rate decision.
The central bank is expected to leave the interest rate at a steady 0.50%, however any change in this or implication that a change could be due in the near future is certain to cause waves in the Pound’s performance.
Chancellor of the Exchequer George Osborne is also due to make his Budget 2016 speech to British Parliament later this week. It’s highly likely that any of the decisions or announcements made in regards to the budget throughout this week will impact UK economy and by extension cause reactions within the foreign exchange market.
On the other hand, analysts have been predicting that Australia’s economy will perform strongly throughout 2016 and its economy will continue to grow into 2017. Iron Ore is expected to be above average levels until towards the end of June, implying AUD will enjoy a few more months of benefitting highly from that trade.
While the next Reserve Bank of Australia (RBA) announcement isn’t due until the beginning of April, Westpac bank are to release their leading index results for February on Wednesday and the highly anticipated Unemployment data will be released the following day, meaning the ‘Aussie’ should also expect a period of influential movement towards the end of the week.
Despite the Australian Dollar currently expecting a fruitful year of continued growth, some analysts also predict that its growth against the struggling Pound seems unlikely to continue for much longer. The AUD/GBP’s near-year high would likely indicate that a rebound of movement could begin in the near future, especially if imminent UK data proves positive.
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate is currently trending in the region of 0.5243 while the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate trends in the region of 1.9063.