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GBP/AUD Recovers from Six-Month-Lows on Risk-Off Movement

Last week’s high: AU$1.7586

Last week’s low: AU$1.7286

Australian Dollar Sold as Investors Seek Safer Currencies

The Australian Dollar’s bullish run against the Pound, which lasted throughout most of June, ended last week as the Pound to Australian Dollar exchange rate rebounded slightly from its worst levels in over six months.

For most of last week, GBP/AUD tumbled as fears of a potential ‘no deal’ Brexit weighed heavily on Sterling. Concerns that the UK may leave the EU without any Brexit deal at all dominated headlines and left the Pound broadly weak, and even the latest UK data failed to give the British currency much support.

However, while Sterling remained unappealing and GBP/AUD ultimately closed the week lower, the Australian Dollar was sold on Thursday and Friday due to the latest trade uncertainties.

US-China trade clashes escalated again last week and as Australia’s economy heavily relies on trade with both China and the US, this undermined USD.

Central Bank news weighed on the Australian Dollar too. The Reserve Bank of Australia’s (RBA) latest statement on monetary policy saw the nation’s inflation forecast downgraded, making investors even more doubtful that the bank could hike Australian interest rates any time soon.

AUD Outlook: Australian Wage and Job Data Could Boost AUD

The Australian Dollar’s weak-streak may not last if investors calm on last week’s risk-off movement. Markets were already fairly bearish on the Reserve Bank of Australia (RBA) too, so last week’s news may not lead to a prolonged Australian Dollar downtrend.

Instead, the Australian Dollar may find support in upcoming Australian ecostats, which could cause the Pound to Australian Dollar exchange rate to fall to near its worst levels again. Australian business confidence data will come on in Monday, followed by consumer confidence on Tuesday.

The biggest Australian ecostats of the week will be Wednesday’s wage growth figures and Thursday’s job market stats. If they impress investors AUD exchange rates may firm.

Sterling demand is likely to be driven by potential Brexit developments, especially comments regarding the possibility of a ‘no deal’ Brexit.

Many key UK ecostats will be published throughout the week too, including UK job stats, inflation figures and retail sales, but even if these impress the Pound’s potential for gains is limited so long as those ‘no deal’ Brexit fears persist.

Key Events

14th August

02:30 Australian NAB Business Confidence

09:30 UK Job Market Report

15th August

01:30 Australian Westpac Consumer Confidence

02:30 Australian Wage Price Index

09:30 UK Inflation Rate

16th August

02:00 Australian Consumer Inflation Expectations

02:30 Australian Job Market Report

09:30 UK Retail Sales

17th August

12:30 RBA Governor Lowe Speech

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To keep up to date with the Australian Dollar, visit the AUD blog in our Currency News section.

Michael Vaughan
Currency Broker

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