Positive Private Sector Credit Growth Limits Pound Australian Dollar Exchange Rate Strength
A better-than-expected set of Australian private sector credit data put the Pound to Australian Dollar (GBP/AUD) exchange rate under some pressure ahead of the weekend.
As growth in credit picked up from 0.1% to 0.3% on the month in December this suggested a greater degree of confidence within the Australian economy.
This offered some support to the Australian Dollar (AUD), encouraging hopes that the fourth quarter growth rate could prove stronger than previously thought.
However, with a sense of risk aversion continuing to hang over markets this ultimately limited the Australian Dollar’s ability to push higher against its rival.
A lack of fresh UK economic data, on the other hand, kept Pound Sterling (GBP) under a degree of pressure throughout trade on Friday.
Australian Dollar Vulnerable Ahead of RBA Policy Announcement
Greater volatility looks set for the Australian Dollar in the week ahead on the back of the Reserve Bank of Australia’s (RBA) latest rate decision.
While markets do not expect to see any change in monetary policy at this stage the announcement could still put pressure on AUD exchange rates.
If policymakers express any renewed sense of anxiety over the outlook of the Australian economy this may weigh heavily on the antipodean currency.
As long as markets see reason to bet that the RBA could loosen monetary policy again before the end of 2021 the GBP/AUD exchange rate may find some renewed traction.
However, the Australian Dollar could make some fresh gains on Monday with the release of the latest Chinese manufacturing PMI.
As the Australian Dollar commonly functions as a market proxy for sentiment towards the Chinese economy any fresh growth here could see AUD exchange rates trending higher across the board.
Pound Looks Set for Pressure on Finalised UK PMIs
January’s finalised UK manufacturing and services PMIs may stoke fresh weakness for the Pound, meanwhile.
Any fresh evidence of the UK economy remaining on the back foot in the face of the Covid-19 crisis could give investors reason to sell out of the Pound in the coming days.
Confirmation that the service sector remained in a state of contraction could put particular pressure on GBP exchange rates, given that the sector still accounts for the majority of the UK gross domestic product.
Support for the Pound could also weaken in anticipation of Thursday’s Bank of England (BoE) policy announcement, even though there appears no change of any policy changes at this stage.
Evidence that the BoE remains open to the possibility of further monetary loosening could weigh heavily on the GBP/AUD exchange rate, especially if policymakers express any doubts over the health of the economy.