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Volatile GBP/AUD Ends Week on the Up

Last week’s high: A$1.7714

Last week’s low: A$1.7524

GBP/AUD Fluctuates on Shifting Risk Appetite and Mixed US Data

The Pound Australian Dollar (GBP/AUD) exchange rate encountered significant volatility last week; awash in the ebb and flow of the changing political situation in Italy and US trade tariff measures on steel and aluminium.

Investors were pleased to hear that Italy’s populist parties are now back on track towards a coalition leadership, with Italy’s President Sergio Mattarella approving the latest suggestion for Finance Minister, and newcomer Giuseppe Conte set to be sworn in as Prime Minister.

Whilst this did help to reduce risk aversion, news that the US is still moving ahead with tariff measures against the EU, Mexico and Canada sent anxiety rippling through the markets once again (even though Australia is exempt).

The data calendar last week for both Australia and the United Kingdom was rather sparse, although a rise in UK net consumer credit and an upsurge in UK manufacturing activity did help to kick GBP/AUD higher as the week drew to an end.

The Week Ahead for GBP/AUD: RBA Rate Decision and Aussie GDP on the Horizon

This week could be a big one for the Australian Dollar (AUD), with the Reserve Bank of Australia’s (RBA) latest policy decision (due Tuesday) expected to cause movement.

The Organisation for Economic Cooperation and Development (OECD) has predicted that the Reserve Bank of Australia will start gradually lifting interest rates towards the end of 2018, but these forecasts are at odds with the consensus among analysts – particularly in light of the recent uptick in unemployment.

Regardless, any sign of hawkish sentiment in the accompanying statement or from Bank Governor Philip Lowe could put GBP/AUD under renewed pressure.

Beyond this, investors will be keeping an eye on trade relations between the world’s economic superpowers, with threats of retaliation against the US from various nations liable to continue to curb risk appetite in the markets.

Key Events

4th June

02:30 AUD Australian Retail Sales April

09:30 GBP UK Construction PMI May

5th June

12:30 AUD AIG Services Index May

14:30 AUD Australian Current Account Q1

15:30 AUD RBA Interest Rate Decision

6th June

02:30 AUD Australian GDP Growth Rate Q1

7th June

02:30 AUD Australian Balance of Trade April

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

 

James Baxter
Currency Trader
T: 01442 892 062

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