Both the pound and the Australian dollar have faced issues over the past couple of weeks which have consequently negatively impacted their currency strengths. There are ongoing concerns surrounding the GBP and the UK’s Brexit campaign that has kept investors guessing. The AUD on the other hand is facing a barrage of damages, with US-China trade talks losing traction paired with recent under-performance in economical data captaining the ship of decline.
Both Currencies in a Sorry State to Start the Week
Last week saw an unpredictable sway for the pound, with October’s UK retail sales declining and annual sales seeing the weakest increase in a year and a half. Added to this, the UK’s inflation had slumped to a three-year low. The GBP did pick up a little in the week thanks to some political optimism; signs that the conservatives may pull through and win the election in December gave a boost to the currency.
Meanwhile, for the AUD, a poor performing annual wage growth and an unfavourable consumer sentiment begin to weigh on the Australian dollar. The optimism previously associated with the US-China trade talks declined as the US looked unlikely to agree on a deal unless it was fitting for them. This brought down the value of the AUD, which is heavily affected by the strength of the Chinese economy due to their extensive trading. Australia also suffered its sharpest decline in three years, which has sparked calls for action to help alleviate wages and economic activity.
GBP Looks to Slide Following Bank of England Inflation Report
The Bank of England is set to release its inflation report on Wednesday, and analysts have predicted that the GBP will slump against the AUD following its release. Optimists however suggest that the pound could rise against the Aussie dollar should surveys report back in favour of the Conservative Party reclaiming power in December, which would increase the chances of the UK leaving the EU by the end of January.
Dovish Reserve Bank of Australia Could Weigh on the AUD Exchange Rates
The RBA’s Assistant Governor, Christopher Kent is set to make a speech at the start of this week. There is potential for the AUD to slide against the GBP. This will likely occur if he emphasises the weakness of the Aussie economy and moves towards a ’dovish’ monetary policy. Flashing forwards to Thursday, the AUD could claw back some gains as the Commonwealth Bank services Purchasing Manager’s Index (PMI) is released. If November’s PMI rises are higher than expected, the AUD is likely to rally.
Investors in the AUD will be hoping for a positive response from Thursday’s PMI alongside more positive news from the US-China trade talks. If both proceed in a positive manner there is a chance that the AUD can lift itself out of its current sorry state and reclaim some of its previous gains.
Feel free to email me, Dayle Littlejohn if you would like to know more on the factors affecting the AUD/GBP pairing or have an upcoming currency transfer [email protected].