AUDGBP Eyes the 2021 Lows as UK Growth Outlook Wins

AUD GBP Trades Above 0.5300 Ahead of Consumer Confidence

The AUDGBP exchange rate was -0.30% lower on Monday as the UK saw continued gains from the recent election and GDP boost. The 0.5500 number has been stubborn, but the pound now eyes the 2021 lows from the 1st of April, which were set at 0.5477.

The AUD to GBP has swung back and forth since the end of January but the British pound is looking to forge ahead after the Aussie dollar was weaker on the latest budget and a UK election boost.

Aussie dollar downside risk

Weaker than expected manufacturing and business activity data out of China has meant a soft start to the new week for the Australian Dollar, with ING Bank stating that they expect pressure on the Aussie in the week ahead.

The Australian Dollar dropped against the Pound, Euro and US currency on Monday after economic data from China disappointed, with economists questioning whether Australia’s largest export destination was heading for a soft patch.

“The commodity related currencies of the Australian and New Zealand dollars have underperformed overnight following the release of weaker than expected activity data from China for April,” according to Lee Hardman, Currency Analyst at MUFG.

Monday’s data showed China’s economy dipped in April with industrial production growth easing to 9.8% in April, down from 14.1% in March.

The Australian dollar has been softer with economic headwinds built up by the slower vaccination rollout down under. The Aussie has also been hit by trade tensions with China. The latest slowing in Chinese data is another headwind for the currency.

UK restrictions hit the pound

The UK hasn’t had it all good with concerns growing about a potential return of restrictions due to the so-called Indian variant of the coronavirus as cases began to increase.

Wales has chosen to pause some its lockdowns with Welsh first minister Mark Drakeford saying:

‘We were thinking of liberalising the rules in the way in which people can meet together, not just in their extended household but beyond that, we’ll pause that for the moment.’

“If the advice on the Indian variant is that it is safe to move ahead, we won’t need to wait for the end of our next three-week cycle to do those things, but the Indian variant is giving us cause for concern.”

The UK is on course for a strong reopening, but the latest virus data is making traders pause. In Australia, a slower vaccine rollout is hitting sterling. The BoE said recently that UK growth will hit 7.2% this year and return to pre-virus levels in 2020, but the latest data is a threat.

The AUDGBP pair is now pushing for the April 1st lows of 0.5477 and the UK sees employment figures tomorrow. With the ongoing furlough situation, that could be the number that drives the British pound towards a support test or a weakening.