The Australian Dollar to Pound exchange rate dropped back from this week’s highs on Wednesday as Australia’s Q2 growth results didn’t give ‘Aussie’ trade enough momentum to keep strengthening. AUD GBP traded near its worst level all week, 0.6104, during Wednesday’s European session.
Australian Dollar (AUD) Softens on Australian Growth Report
Wednesday’s Australian Gross Domestic Product (GDP) results saw mixed reaction from foreign exchange markets.
While the results were positive, they weren’t as strong as some analysts had forecast, leaving the market feeling slightly underwhelmed overall. AUD GBP fell for most of the day as investors digested the news.
Australian growth came in at 0.8% quarter-on-quarter as forecast, improving from the Q1 figure of 0.3%. The yearly growth figure improved from 1.7% to 1.8% as expected.
Some analysts had predicted quarterly growth would reach 0.9%, partially due to strong Australian data published in recent sessions.
According to Shane Oliver, head of investment strategy at AMP;
‘The market seemed to have psyched itself up for something better but that didn’t prove to be the case.
There was nothing in the GDP numbers to advance the case for a rate hike … we’re a long way from operating at full capacity and so a long way from raising interest rates.’
The Australian Dollar was also sold from its highs, as it neared psychological resistance levels against the US Dollar (USD).
Pound (GBP) Bought from Lows
The Pound has benefitted from weakness in the Australian Dollar this week, advancing despite Britain’s disappointing August PMIs from Markit.
Markit’s UK services PMI slowed from 53.8 to 53.2, falling short of the 53.5 forecast. As services make up Britain’s biggest private sector, this report worsened concerns that Britain’s economy was slowing in the second half of the year.
With UK consumers less confident due to a pay squeeze, and businesses concerned about the uncertainty of the Brexit process, some analysts predict Britain’s economy could even see some sort of recession if activity continues to slow.
On top of this, August’s construction PMI disappointed. The overall composite PMI fell short of forecasts for the month.
All these factors have weighed on the Pound’s advances against the ‘Aussie’. Investors have also opted to buy the heavily undervalued Pound up from its lows.
AUD/GBP Forecast: July’s Trade Results Ahead
The Australian Dollar to Pound exchange rate is unlikely to be considerably shifted by economic data until next week’s key datasets come in.
Still, Australia’s July trade balance report and retail sales results could influence the ‘Aussie’ during Thursday’s Asian session.
Friday’s UK data could inspire trade slightly too. Data from July will be published, including trade balance, industrial production, manufacturing production and construction output.
Britain’s Q3 consumer inflation expectations results also have the potential to inspire Sterling movement.
The Australian Dollar to Pound exchange rate could recover if these stats disappoint or if investors become more interested in risk-correlated currencies like the ‘Aussie’ again.
Failing that, next week’s key data includes Australia’s latest confidence surveys and job market results, as well as Britain’s August inflation report.