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Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Rally Grinds to a Halt

Pound Sterling Exchange Rates

The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate grinded a halt yesterday following on from weaker than expected Chinese data, causing the ‘Aussie’ (AUD) to lose a whopping 1.5% against the ‘Pound’ (GBP).

The ‘Aussie’ (AUD) commenced its’ rally against the Pound (GBP) last Tuesday when the Reserve Bank of Australia (RBA) decided to hold interest rates at 2.25%, despite growing market expectation that a rate cut would occur. The rally lasted 4 days, with the AUD/GBP exchange rate moving up by approximately 3.5% over this time before the trend reversed yesterday.

Yesterday the poor Chinese Trade Balance stopped the rally that the Australian Dollar had been enjoying against the Pound Sterling. The economic release indicated that the Trade Balance for March was $3.08B when $40.20B had been forecast. The major surprise was that Chinese Exports came in 25% below the forecast to result in -15.0%, when a positive 10% change was anticipated. Today the AUD/GBP exchange rate will be influenced by the Australian NAB Business Confidence index figure, scheduled for release at 11:30 AEST.

The focus of economists and investors will turn to the UK this evening when the Consumer Price Index (CPI) will be announced. Than annualised UK CPI is currently sitting at the lowest level it has been in over a decade at 0.0%, with expectations being that it will remain at this level. A deflation result of the CPI being under 0.0% should see a continuation of the AUD/GBP exchange rate rally. A better than expected figure will likely halt or reverse the recent short-term trend and increase and in effect, decrease the AUD/GBP exchange rate.

Tomorrow’s Chinese economic data in the form of Gross Domestic Product (GDP), Industrial Production and Retail Sales will exert some influence on the AUD/GBP exchange rate during the Australasian trading session.

Australian Dollar to Pound Sterling (AUD/GBP) Exchange Rate Forecast

The AUD/GBP exchange rate movement in the short-term will be predominantly determined by the UK CPI release tonight and employment-focused data in the latter half of this week, however today’s NAB Business Confidence will also influential.

Both the Australian and UK economies will report on employment data via the release of their official Unemployment Rate and Employment Change figures, which at this stage appears to favour Sterling (GBP) strength. The Australian Unemployment Rate is forecast to remain at 6.3% with only a minor 15K jobs to have been added to the economy for the month of March whilst the UK Unemployment Rate is expected to fall from 5.7% to 5.6% and Employment Change figure of 170K.

The mid-long term forecast for the AUD/GBP exchange rate still appears to favour the ‘Pound’ (GBP) despite the recent rally from the ‘Aussie’ (AUD) due to strong likelihood of the RBA cutting interest rates later this year. Uncertainty surrounding the affect that the UK general election will have on the AUD/GBP exchange rate will become clearer over the coming weeks as we draw closer to the May 7th election date.