GBP/AUD Exchange Rate Edges Higher as Outlook for the UK Economy Improves
The Pound to Australian Dollar exchange rate rose today ahead of Chancellor Rishi Sunak’s announcement of the 2021 Budget.
Today saw Rishi Sunak say that he will use the ‘full measure of our fiscal firepower’ to protect jobs and bolster the UK economy.
Additionally, the UK furlough budget is expected to extend until the end of September.
As a result, UK investors are becoming more confident about the outlook for the UK’s economy in the months ahead.
In UK economic data, today saw the release of the UK Services PMI for February, which fell below forecasts to 49.5.
Nonetheless, signs of stability to the UK economy has strengthened the GBP/AUD exchange rate today.
Analysts at Markit commented on the data, saying:
‘A degree of stability returned to the UK service sector after the sharp downturn in output at the start of 2021. Restrictions on travel, leisure and hospitality due to the national lockdown continued to curtail overall activity, but there were some pockets of growth in technology and business services.’
However, we could see the Pound head higher today if Chancellor Rishi Sunak’s 2021 Budget provides a glimmer of light at the end of the tunnel for the UK economy.
Australian Dollar (AUD) Struggles Despite Stronger-Than-Expected GDP Data
The Australian Dollar struggled against the Pound today despite stronger-than-expected Australian GDP data for the fourth quarter.
The latest GDP figure rose by 3.1% quarterly, beating forecasts of a 2.5% increase and improving the outlook for Australia’s economy in the months ahead.
Australian Treasurer Josh Frydenberg commented:
‘Our economic recovery plan is working, and today’s national accounts is a testament to that fact. There are challenges ahead. But you wouldn’t want to be in any other country but Australia as we begin 2021.’
Added to this, improved risk-sentiment has boosted demand for the risk-sensitive Australian Dollar.
Furthermore, the US President Joe Biden’s $1.9 trillion stimulus programme appears to be progressing after successfully passing through the House of Representatives.
Consequently, we could see the AUD/GBP exchange rate head higher this week if the world’s largest economy passes its enormous stimulus plan.
GBP/AUD Exchange Rate Outlook: Could Strong UK Construction Data Boost Sterling?
Australian Dollar traders will be looking ahead to tomorrow’s release of Australia’s latest Retail Sales report for January.
Any improvement in the outlook for the Australian economy would be AUD-positive.
Tomorrow will also see the publication of Australia’s Trade Balance report for January. If this shows a marked improvement in exports at the beginning of the year, then AUD would rise.
Risk sentiment will also continue to drive the AUD/GBP exchange rate this week.
As a result, we could see AUD increase as optimism in the global economy improves. Covid-19 cases continue to drop worldwide and more and more nations rollout of coronavirus vaccines.
Pound investors will be monitoring tomorrow’s release of February’s UK Construction PMI.
If this confirms consensus and emerges out of contraction territory the GBP/AUD exchange rate would benefit.