Rising Australian Business Confidence Dents Pound Australian Dollar (GBP/AUD) Exchange Rate
The Pound Sterling to Australian Dollar (GBP/AUD) exchange rate remained on the back foot as September’s NAB business confidence index saw a surprise improvement.
While forecasts had pointed towards the index sinking from -8 to -10 on the month it instead clocked in at a more respectable -4.
This suggests that sentiment within the Australian economy has started to recover in the third quarter, bolstering hopes of a stronger quarter of economic performance.
With the general sense of market risk aversion easing the mood towards the Australian Dollar (AUD) naturally improved, as worries over Donald Trump’s Covid-19 diagnosis faded.
Although confidence in the wider global outlook remains fragile this was not enough to weigh on AUD exchange rates at this stage.
Slump in UK Car Sales and Service Sector Job Losses Weigh on GBP/AUD Exchange Rate
News that UK car sales had experienced their worst September in 20 years also weighed on the GBP/AUD exchange rate, meanwhile.
With car sales significantly down on the year as a result of the Covid-19 pandemic anxiety over the impact on the UK manufacturing sector naturally picked up once again.
Although the finalised UK services PMI for September showed a positive revision, from 55.1 to 56.1, this failed to offer markets any particular cause for confidence.
As the sector experienced another month of job cuts this fuelled worries over the possibility of a further wave of redundancies now that the government’s furlough scheme has ended.
The announcement of Cineworld’s closure of all its UK sites added to the bearish mood, with thousands of additional jobs within the service sector now lost.
With the question of Brexit still hanging over the economic outlook, as well as the potential for further Covid-19 disruption, there appeared little reason to support Pound Sterling (GBP) on Monday.
Australian Dollar Volatility Forecast on Trade Data and RBA Decision
Further gains may be in store for the Australian Dollar on the back of August’s trade balance, meanwhile.
With forecasts pointing towards a widened trade surplus confidence in the underlying performance of the Australian economy may well improve.
As long as trade conditions appear to be on the up this should limit the potential for AUD exchange rate weakness in the near term.
However, the Reserve Bank of Australia’s (RBA) latest policy announcement could easily dampen any enthusiasm for the Australian Dollar on Tuesday.
If policymakers show increased signs of dovishness this may leave the GBP/AUD exchange rate biased to the upside.
The prospect of further policy action from the RBA could easily weigh on the Australian Dollar, especially if the central bank expresses caution over the economic outlook.
Any indication that interest rates could see another cut may also drive AUD exchange rates lower across the board, with investors wary of the potential for additional monetary loosening.
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