Australian Dollar to Pound Exchange Rate Tests Fresh Lows Despite Mixed UK Outlook
Despite a brief bout of Pound selling on Tuesday, weakness in the Australian Dollar (AUD) caused the Australian Dollar to Pound (AUD/GBP) exchange rate to slip to new monthly lows during the European session.
AUD/GBP has been mostly tumbling since markets opened this week, due to low market appetite for risk-correlated currencies like the Australian Dollar (AUD) as well as ‘soft Brexit’ hopes supporting the Pound (GBP).
The pair opened the week at the level of 0.5775 and plunged, hitting a one-month-low of 0.5702 on Tuesday and struggling to recover from this level.
As the Pound had recently touched on multi-month-highs against other major currencies, like the Euro (EUR) and US Dollar (USD), the British currency was briefly sold from its highs in profit-taking. However, AUD/GBP ultimately remained low.
Australian Dollar (AUD) Strength Limited by Risk-Off Movement
AUD/GBP fluctuated on Tuesday. Its gains earlier in the European session were very limited and the pair remained relatively close to its monthly lows towards the end of the day.
This was due to a lack of market demand for risk-correlated currencies like the Australian Dollar.
Concerns that the US Presidency will crack down on global trade for its ‘America First’ agenda have caused concerns that this could have a negative impact on the global growth outlook, driving investors away from risks towards more ‘safe haven’ assets.
Risk-sentiment has also been pressured by a lack of strong commodity news in recent sessions. Prices of iron ore, Australia’s most lucrative commodity, fell on Tuesday due to high stocks of the commodity in China.
Lastly, Australia’s Roy Morgan consumer confidence print weakened to 119.4 this week after three weeks of gains. Overall, the Australian Dollar hasn’t been appealing enough to hold a recovery against Sterling.
Pound (GBP) Exchange Rates Supported by UK Borrowing Data
Sterling’s Tuesday weakness was limited by the latest UK ecostats, as well as market anticipation for data due for publication in the coming days.
Britain’s December public sector net borrowing results were solid, rising to £-0.98b while the previous figure was revised higher from £-8.12b to £-6.65b.
The report was likely good news to the UK Treasury and it indicated that UK Chancellor Philip Hammond was on track to meet his fiscal targets for the 12 months running into March 2018.
Data from the Confederation of British Industry (CBI) was mixed however.
CBI’s business optimism report for Q1 improved from -11 to 13 and January’s industrial trends data beat expectations with a result of 14, but the report revealed that manufacturers remained concerned about UK skills shortages.
Australian Dollar to Pound (AUD/GBP) Forecast: UK Wage Data Could Influence BoE Bets
Vital UK data will be published on Wednesday and this is likely to drive Australian Dollar to Pound (AUD/GBP) exchange rate movement for the coming days.
Amid a lack of notable Australian ecostats due for publication, the Australian Dollar is likely to be driven more by risk-sentiment and the Pound’s strength.
Sterling investors are likely to react to Britain’s November UK job market report, which will include key employment change, unemployment rate and wage growth stats.
The primary focus will be on UK wage growth, as economists have been concerned about slower wage growth falling behind surging domestic inflation.
If the wage data comes in worse than expected, AUD/GBP could recover some of its recent losses as the Pound outlook would weaken.
On the other hand, strong wage data would make the Pound more appealing and this could even boost speculation that the Bank of England (BoE) could take a more hawkish tone on monetary policy in the coming year.
Westpac’s December leading index report for Australia will be published on Thursday but is not expected to be particularly influential.