Australian NAB Business Confidence, Conditions Readings Fail to Bolster AUD Exchange Rates
The Australian Dollar Pound Sterling (AUD/GBP) exchange rate took a small tumble on Tuesday, failing to find sufficient support from a run of upbeat Australian National Australia Bank (NAB) reports.
The NAB business confidence reading for January climbed to a score of 12 (up from 10), whilst the business conditions survey soared to 19 (up from 13) – with the confidence reading marking a nine-month high.
These surveys provide insight into the state of Australia’s business sector, providing leading indicators that are used by markets to try and discern the future direction of the Australian economy.
In this sense, the rise in these readings provides an encouraging signal for investment, further reflecting improving global economic conditions.
NAB Chief Economist Alan Oster discussed the readings thusly:
‘While forward orders have eased a little, they remain above average and capacity utilisation has been trending up which is a good sign for both future investment and employment. (…) The result probably reflects the still-elevated residential construction pipeline, infrastructure construction and the gains in non-residential building approvals last year’.
UK Inflation Remains near Six-Year Highs – GBP Exchange Rates Rally
The Pound rallied on Tuesday, bolstered by the latest UK consumer price index (CPI) readings and the hype for a possible rate hike in May that ensued.
The rate of inflation across the UK remained steady at 3% in January, just short of the recent six-year high but beating the market forecast of a slip to 2.9%.
The core inflation rate, however, (which excludes the prices of energy, food, alcohol and tobacco), increased to 2.7% in January, up from 2.5% in the previous period and the market consensus of 2.6%.
The rise in core UK inflation increasingly builds a case for a rate hike from the Bank of England (BoE) in May, with the central bank having previously indicated that ongoing high levels of inflation could warrant an earlier-than-expected hike.
Indeed, this result ticks one of the central bank’s boxes, with the only remaining factor being demonstrable progress on the Brexit transition front.
Australian Dollar Pound Sterling (AUD/GBP) Exchange Rate Forecast: Aussie Employment Readings Ahead
The Australian Dollar Pound Sterling (AUD/GBP) exchange rate could find some room to breathe on Thursday, depending on the result of Australia’s employment readings.
Markets are currently expecting the Australian unemployment rate to remain steady at 5.5% in January, consistent with the previous period.
If a great deal of jobs have been added, then the AUD/GBP exchange rate could find itself on better footing.
Next week’s Australian wage growth readings could be more salient, however, with the Reserve Bank of Australia (RBA) not expected to shift towards hawkish monetary policy measures unless the labour market tightens, and wage growth rises (an eventuality that would then provide fertile soil for inflation to increase).
In other news, Wednesday’s US inflation readings could have a significant knock-on effect on the ‘Aussie’ Dollar, particularly if they prove better than expected.
Indeed, if US inflation holds steady, or increases, then the US Dollar (USD) could rally and siphon even more demand away from the Australian Dollar.