AUDGBP exchange rates could break out of current ranges this week with several economic releases from Australia and the UK due for publication over the course of the next couple of days.
In the UK, this morning’s long list of releases from the jobs market could prove particularly decisive for sterling’s value on the international stage. Given the latest surveys suggesting that 1/3 of UK businesses are expected to make redundancies in between June and September of this year, the markets might be paying close attention into the latest stats which means this mornings data could be more weighted than usual. Of course, investors tend to keep an eye on the health of the jobs market as a way of keeping their fingers on the pulse. A sudden slow down in average earnings or a pickup in unemployment benefits claimants can be seen as an early slowdown of growth within the economy we a drop a consumer spending likely following close behind. It will be interesting to see if the average earnings readings release from this morning does reshape the AUDGBP pairing as a result. A slight contraction might not have held much weight as it would be understandable given the circumstances however this hasn’t proved to be the case and is worth discussing with your account manager if you do have a currency requirement involving the pound.
Importantly tomorrow ‘s pivotal GDP release for the UK could well prove to be the market mover for AUDGBP levels in the second half of the week. Last week the Bank of England (BoE) remained upbeat when discussing it’s views over the outlook for the UK economy and although the monetary policy committee conceded a V-shape recovery does not look as likely in the near term, the perceived damage caused by the virus is no where near as bad as first anticipated. As such, the markets might be waiting to see if the latest GDP release supports the Bank of England’s optimism before getting behind the pound and support it’s rally higher on the international stage. On the flip side, a bad surprise here could draw added question marks around the BOE’s policy making process. It is worth remembering that there were plenty of rumours circulating of the potential of negative interest rates in the UK not that long ago. The potential of which could have drastic implications for the pound.
Australian Dollar to Pound Exchange Rates Falling: Jobs Data to Drive the Next Trend?
As far as the Australian dollar building further momentum, this week’s inflation figures once again find themselves in the spotlight. Even before the virus took hold of the global economy, investors were concerned about the slowing in prices which was threatening to stall the economy and indeed the Australian dollar. The overall concern at the end of 2019 was that the Reserve Bank of Australia (RBA) might have it’s hand forced into cutting their relatively high interest rates to improve the flow of funds within the economy. Fast forward 8 months and it was the virus in the end that forced the Reserve Bank of Australia to drop to record lows to help maintain favourable lending conditions, stimulate consumer spending and protect jobs. Tonight’s Westpac consumer confidence release then might hold added weight with the market, with investors looking for signs of a reaction following the RBA’s efforts. The Wage price index might also be worth monitoring as indications of slowing average earnings against the average cost of living could signal a slowing in consumer spending further down the line.
It is possible however that the main driver for Australian dollars could be the employment data due on Thursday. The heavy hits to Australia tourism industry have been well documented and the understandable loss of jobs here could hold repercussions for the AUD throughout the month of august.
This could be one of the factors that has continuously seen the Australian dollar surrender it’s early July gains, with GBP AUD rallying from 1.77 to the mid 1.82 on interbank exchange rates. This 2.7% move in the space of 3 weeks marks a significant change in trend for the Australian dollar and highlights a clear show of support for the pound ever since the Bank of England squashed the initial calls for negative interest rates. Clearly fiscal policy setting will continue to be a major driver within the currency markets and so it will be interesting to see if this week’s jobs data from Australia further justifies the RBA’s caution.
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