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Reserve Bank of Australia Speculation and Trade Tensions Lead to Australian Dollar Slump

Last week’s high: AU$1.7931

Last week’s low: AU$1.7576

GBP/AUD Recovers Despite No-Deal Brexit Fears Dominating Sterling

Last week saw  volatile movement in the Pound to Australian Dollar exchange rate. GBP/AUD plunged to its worst levels of 2019 at the start of the week in reaction to the rising odds of a no-deal Brexit.

However, the pair spent the rest of the week recovering. Despite no-deal Brexit fears dominating outlooks for both Sterling and the UK economy overall, broad weakness in the Australian Dollar caused GBP/AUD to rise.

Despite Australian inflation, manufacturing and retail sales stats beating forecasts, investors avoided the Australian Dollar in the second half of the week as a result of RBA rate cut speculation.

Towards the end of the week, US President Donald Trump’s clash with China over trade tariffs weakened AUD further. Trump’s attitude effectively culled the US-China trade truce and caused weakness in trade correlated currencies like the ‘Aussie’.

AUD Outlook: Reserve Bank of Australia (RBA) in Focus

With no-deal Brexit fears still dominating the Pound outlook over the coming week, Sterling will likely remain under pressure. Brexit news and rival strength, rather than UK data, can be expected to drive currency fluctuations.

UK services data on Monday and growth data on Friday may bolster Sterling if either, or both, impress, but Australia’s upcoming stats will also be of interest.

Key Australian data includes services PMI on Monday, trade balance data on Tuesday, and construction and home loans on Wednesday.

However, by far the biggest event next week for AUD investors will be the Reserve Bank of Australia’s (RBA) August policy decision which takes place on Tuesday.

Investors expect the bank to hint at further interest rate cuts. If the bank proves less dovish than expected, AUD has a good chance of pushing GBP/AUD back towards its worst levels.



Key Events

5th August

Australian Services PMI

09:30 UK Services PMI

6th August

02:30 Australian Trade Balance

05:30 Reserve Bank of Australia (RBA) Policy Decision

7th August

Australian Construction PMI

02:30 Australian Home Loans

9th August

02:30 RBA Statement on Monetary Policy

09:30 UK Trade Balance

09:30 UK Business Investment

09:30 UK Manufacturing and Industrial Production

09:30 UK Growth Rate



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