Solid Australian Data Weighs Down Pound Sterling Australian Dollar (GBP/AUD) Exchange Rate
Rising global trade tensions failed to offer any support to the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate at the start of the week.
While the US continued its shift towards a more protectionist policy outlook, with Chinese trade talks appearing under threat of collapse, this was not enough to dent the Australian Dollar (AUD) on Monday.
Markets were instead encouraged by the positive nature of the latest raft of Australian data, with signs pointing towards a more robust domestic economy.
The Australian business indicators survey bettered forecast, painting a more optimistic picture of the economic outlook.
Andrew Hanlan, research analyst at Westpac, commented:
‘Company profits were always likely to be relative upbeat early in 2018, with the mining sector receiving a boost from higher commodity prices and increased turnover.
‘Indeed, profits exceeded these already positive expectations, climbing 5.9% in the quarter vs market median and Westpac forecast of 3.0%.’
All in all, this points towards a stronger first quarter for the Australian economy, something which could see AUD exchange rates gaining further momentum.
GBP/AUD Exchange Rate to Rally on Stronger UK Services PMI
Although the latest UK construction PMI held steady on the month at 52.5 this did not offer the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate any particular support.
Demand for Pound Sterling (GBP) could pick up sharply, however, if May’s UK services PMI surprises to the upside.
If the service sector gains fresh momentum this is likely to encourage bets that the Bank of England (BoE) may raise interest rates again sooner rather than later.
As long as the UK’s economic growth engine demonstrates resilience the odds of a gross domestic product rebound in the second quarter look set to rise.
On the other hand, any disappointment here could weigh heavily on GBP exchange rates this week.
Further Pound Sterling Australian Dollar (GBP/AUD) Weakness Forecast on Accelerating Australian Growth
Further volatility is likely in store for the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate on the back of Wednesday’s Australian growth data.
Forecasts point towards a solid uptick in the first quarter Australian gross domestic product, with growth set to accelerate from 2.4% to 2.7% on the year.
While this may not be enough to alter the current policy outlook of the Reserve Bank of Australia (RBA) this could still give AUD exchange rates a fresh rallying point.
However, if the global trade outlook continues to deteriorate the upside potential of the Australian Dollar is likely to remain limited.
Should the US and China opt to impose heavy tariffs on each other this could weigh heavily on demand for the Australian Dollar, denting commodity prices.
An escalation in tensions between the US and its fellow G7 members may also offer support to the Pound Sterling to Australian Dollar (GBP/AUD) exchange rate this week.