UK GDP Acceleration Boosts Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate
Stronger UK gross domestic product data and comments from chief EU negotiator Michel Barnier saw the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate trending higher.
As the UK economy demonstrated fresh signs of accelerating growth the mood towards Pound Sterling (GBP) improved at the start of the week.
However, the economy may struggle to sustain this level of growth in the months to come, as analysts at TD Securities noted:
‘The three-month growth rate in GDP is 0.6% 3m/3m. This should leave third quarter growth on a relatively solid footing, but many one-off factors drove growth over the May-Jul period (e.g., the World Cup, warm weather), and we expect that as these come off, growth should slow somewhat in the second half of the year, leaving the BoE comfortably on hold until well into 2019.’
Even so, as Michel Barnier suggested that a Brexit deal could realistically be reached in the next six-eight weeks this prompted GBP exchange rates to strengthen sharply.
Australian Labour Market Data Likely to Weigh on GBP/AUD Exchange Rate
Although Chinese inflation picked up in August this failed to particularly weigh on the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate as a sense of market risk aversion persisted.
Confidence in the Australian Dollar (AUD) remains largely limited as the US and China continue gearing up to impose additional trade tariffs on one another.
AUD exchange rates may find support in the days ahead if August’s labour market data proves encouraging.
Forecasts point towards a modest uptick in the participation rate on the month, indicating that a larger number of Australians are economically active.
While this is likely to keep the corresponding unemployment rate under pressure this sign of labour market tightening could give the Australian Dollar a solid boost against its rivals.
However, as long as global trade tensions continue to escalate the upside potential of AUD exchange rates is likely to remain limited.
BoE Policy Announcement Set to Deliver Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate Volatility
Thursday’s Bank of England (BoE) policy announcement looks set to provoke additional volatility for the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate.
Although no change in monetary policy is expected at this stage the Pound could still see some sharp moves in the wake of the announcement.
If policymakers appear to be taking a less optimistic view of the domestic outlook the potential for interest rates rising again sooner rather than later is likely to diminish.
Unless the BoE appears braced to hike rates again in the coming months the GBP/AUD exchange rate looks set to come under pressure.
However, further signs of progress in Brexit negotiations could well keep the Pound from suffering any particular losses in the near term.
As long as investors see reason to expect to see a deal agreed before November the downside potential of the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate is likely to remain limited.