The Pound Australian Dollar exchange rate has advanced this week but was unable to hold its best levels since early-June due to ‘Aussie’ strength. The pair could advance again next week if the RBA disappoints however.
GBP AUD began this week trading at around 1.6775 and hit a multi-week high of 1.6675 on Wednesday. Towards the end of the week the pair trended close to the level of 1.69.
Pound (GBP) To Be Influenced by UK PMIs Next Week
The past week has been a busy one for the Pound and has seen it advance against many major rivals including the Australian Dollar.
The biggest boost in Sterling demand came after the Bank of England (BoE) Governor, Mark Carney, indicated the bank may need to withdraw some of its aggressive stimulus measures sooner than expected depending on the resilience of Britain’s economy.
BoE chief economist Andy Haldane has also maintained his own hawkish tone, arguing that rates may need to rise to keep on top of Britain’s living cost issues.
While UK wage growth remains a significant concern for BoE officials and markets, this week’s hawkishness from top-ranking BoE officials was enough to cause lasting demand for the Pound.
The past week’s UK ecostats have had little effect on Pound movement. Friday’s final Q1 Gross Domestic Product (GDP) report met projections and GfK’s June consumer confidence report worsened from -5 to -10.
Next week’s data will be far more influential as a slew of key UK data will be published throughout the week.
Monday will see the publication of Markit’s June manufacturing PMI, followed by construction on Tuesday and key services and composite prints on Wednesday.
Manufacturing will be relatively influential, but as services account for a considerable fraction of UK growth the services report will have the most impact on the Pound outlook.
If PMIs fail to meet expectations, concerns will grow that Britain’s economy may not be as resilient as hoped for the rest of the year. This would lead to a drop in BoE tightening bets and a weaker Pound in the short to long-term.
Australian Dollar (AUD) Traders Anticipate RBA
The Australian Dollar has seen stronger demand over the last week due to low Federal Reserve interest rate hike bets and strong commodity news, but it has been unable to hold against a strong Pound’s gains. Recent Australian data has been relatively low-influence.
Pound traders have had plenty of central bank news to react to in recent weeks but next week it’s the Australian Dollar’s turn.
While Monday will see the publication of AiG’s manufacturing PMI for June as well as May building permits, Tuesday’s Reserve Bank of Australia (RBA) policy decision will be the biggest news for AUD traders.
In recent months the RBA has been steadily more hawkish, but has put focus on Australia’s housing and jobs markets as key concerns.
If the RBA has not perceived these elements as having improved, the bank’s statement is likely to be met with mixed reaction and the ‘Aussie’ could weaken.
However, in the chance the RBA takes an even more hawkish tone, the Australian Dollar could see stronger demand next week.
The more hawkish the bank becomes, the more investors will speculate that an interest rate hike is closer than an interest rate cut. This would leave the long-term Australian Dollar outlook higher.
Other Australian ecostats investors will be watching for next week include retail sales stats from May, services and construction PMIs from AiG and May’s trade balance results.
GBP AUD Interbank Rate
At the time of writing this article, the Pound to Australian Dollar exchange rate 1.6895. The Australian Dollar to Pound exchange rate trades around 0.5918.
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