Despite poor UK data the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate retreated ahead of the weekend as investors piled back into the softened Pound.
The ‘Aussie’ (AUD) rallied on Thursday with encouragement from the first quarter NAB Business Confidence report. While the headline figure suggested that sentiment had weakened from 5 to 4 at the start of the year, this was counteracted by signs of sustained improvement in various areas of the domestic economy. In part the index was pulled down by the substantial market volatility and uncertainty seen in the earlier months of the quarter, with indications suggesting that confidence could see a more sustained improvement in coming months. This more bullish indication consequently pushed the Australian Dollar to Pound Sterling (AUD/GBP) exchange rate to a fifteen-month best of 0.5462.
Despite the UK posting disappointing retail and public finance figures later on Thursday this failed to keep the AUD/GBP exchange rate on an uptrend. Markets initially pushed the Pound (GBP) lower across the board as the UK was found to have significantly overshot its borrowing target for the 2015-2016 fiscal year. While this rather undermines the likelihood of the national deficit being eliminated by 2020, as Chancellor of the Exchequer George Osborne had pledged, Sterling soon rallied as the latest EU referendum polls continued to point towards a ‘Remain’ camp lead.
Some measure of confidence returned to the antipodean currency ahead of the weekend, as the odds of an imminent interest rate hike from the Federal Reserve continued to decline. The latest gauge of the US manufacturing sector pointed towards a decline in growth in April, while the Leading Indicators Index showed a more limited rebound in the economic outlook than forecast. As looser US monetary policy reduces the pressure on the Reserve Bank of Australia (RBA) to consider cutting rates this somewhat boosted the appeal of the ‘Aussie’.
Nevertheless, in spite of a dearth of supportive UK data releases the Pound extended its bullish run against rivals on Friday, keeping the AUD/GBP exchange rate on a downtrend.
Next week the Australian Dollar could recover its recent strength on the back of the first quarter Australian GDP report, providing the economy is found to have strengthened or held steady. However, a downside surprise could significantly dampen the appeal of the antipodean currency, with researchers at Westpac noting that;
‘The pass though from the weaker AUD is only modestly offsetting an overall benign inflation environment. Falling fuel and fruit prices add to the general seasonal softness while housing costs remain well contained.’
With the UK also due to release its first quarter growth figures on Wednesday the AUD/GBP exchange rate is likely to see some heightened volatility. Should the British economy have faltered at the start of 2016 thanks to ‘Brexit’-based uncertainty, the Pound could stand to return to a significantly weaker footing.
Disclaimer: Currency-Converter.com.au and its data provider, TorFX, make no claims regarding the validity or exactness of the information provided in on this site and will not be held liable for any use, interpretation, or other implementation of the information provided. Currency-converter.com.au make no warranties, express or implied, as to results to be obtained from use of such information, and make no express or implied warranties of condition, quality, performance, merchantability or fitness for a particular purpose or use. Currency-converter.com.au shall not have any liability for the accuracy of the information contained in the services provided or ommissions there in which are made available on a free, as-is basis. None of the aforementioned parties shall be liable for any third party claims or losses of any nature, including, but not limited to, lost profits, punitive, consequential, special, incidental, indirect or similar damages even if advised of the possibility of such damages. Rates offered are interbank rates and may not be the same as offered by your financial institution, and do not include commissions. Rates shown on this site will vary from those provided by TorFX or other providers linked to from this site.