Anticipation for Q4 UK Growth Projections Left Australian Dollar to Pound Exchange Rate Flat
Amid a lack of notable relevant data published on Thursday, the Australian Dollar to Pound (AUD/GBP) exchange rate trended within a tight region throughout the day.
AUD/GBP has lost significant ground this week due to broad strength in the Pound. The pair opened the week at the level of 0.5774 and has since touched on a monthly low of 0.5646.
During Thursday’s European session the pair trended in a tight range near the level of 0.5660.
As investors anticipated a vital UK Gross Domestic Product (GDP) projection report due for publication on Friday, the Pound’s recent rally slowed and AUD/GBP was able to avoid further losses.
Australian Dollar (AUD) Exchange Rates Benefit from US Dollar (USD) Weakness
The poor performance of the US Dollar (USD) in recent weeks has left investors hungrier for risk-correlated currencies like the Australian Dollar (AUD), despite concerns about potential trade protectionism which could harm trade-focused economies.
As a result, the Australian Dollar to Pound (AUD/GBP) exchange rate’s losses were limited on Thursday as the ‘Aussie’ benefitted from risk-sentiment.
Demand for the Australian Dollar was also stronger following the publication of Westpac’s December leading index report.
The leading index indicated that Australia’s economy would be growing further above trend than expected around six months from now.
This, on top of rising market speculation that the Reserve Bank of Australia (RBA) could hike Australia’s interest rates sometime in 2018, helped the ‘Aussie’ to hold against Sterling strength on Thursday.
Pound (GBP) Remains Sturdy Following UK Jobs Report
Rising confidence in the possibility of a ‘soft Brexit’ as well as data indicating Britain’s economy has been more resilient than expected during the Brexit process has helped the Pound to pick up steam since the beginning of the year.
Sterling held its recent gains on Thursday with investors still pleased with Wednesday’s UK job market data from the three months into November.
Britain’s unemployment rate had remained at 4.3% as expected, while the employment change figure came in at a stronger than forecast 102k.
Investors are hopeful that the latest wage growth data indicates that wages will catch up to domestic inflation and close the gap causing a household pay squeeze. This was supported by a better-than-expected average earnings excluding bonuses figure of 2.4%.
Australian Dollar to Pound (AUD/GBP) Forecast: UK Growth Projection in Focus
Unless Britain’s Q4 2017 Gross Domestic Product (GDP) projection comes in well below expectations during Friday’s European session, the Australian Dollar to Pound (AUD/GBP) exchange rate is likely to end the week over half a pence below its opening levels.
UK growth is forecast to have remained at 0.4% quarter-on-quarter and have slowed from 1.7% to 1.4% year-on-year.
If the data disappoints, AUD/GBP could recover some of its recent losses. A surprisingly strong UK growth report would help the Pound to round off a week of gains with more bullishness instead.
Unless US Dollar (USD) trade or market risk-sentiment changes significantly in the coming day, the Australian Dollar could remain relatively limp until the end of the week.
Instead, Australian Dollar investors are likely to look ahead to next week, when NAB’s Australian business confidence survey from December and Q4 inflation results will be published.
Sterling trade could be quieter next week in comparison, as the week’s most notable ecostats will be Markit’s manufacturing PMI from January.