Since the GBP suffered major losses across currency markets following the UK’s decision to leave the EU in 2016, the currency has generally struggled against its major pairings as the ongoing uncertainty surrounding Brexit reduced sentiment in the currency and thus hindered gains.
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Despite this, in October last year, the GBP reached the best levels against the AUD seen since the referendum, but then suddenly weakened approximately 14 cents to some of the worst levels in the 12 months prior, dropping just below 1.73.
Since then, Sterling has seen steady gains against the Aussie, with current interbank levels appearing to be moving closer and testing 1.80.
The 1.80 level has been somewhat of a resistance for the GBP/AUD paring over the last 12-months, so it remains to be seen whether the pairing will exceed it and then find stability above, but with general sentiment in the GBP seemingly on the up, following growing reports that a potential ‘no-deal’ exit from the EU is becoming less likely, there its growing optimism that the market might accommodate this.
Over the last 12 months, there has been a lot of negativity surrounding the longer-term outlook for the Australian economy with generally flat inflation, interest rates being held at the same level since 2016 and worries surrounding the rapid decline in house prices.
Despite this, the labour market has continued to perform well, with unemployment currently at the lowest level since April 2012, at 5.1%. As the latest sets of employment data are to be released on Thursday, investors will be keeping an eye on the outcomes and the results could influence market movement if the figures deviate from expectation.
Overnight, Chinese GDP data was released which showed a slight reduction of 0.1% for the previous quarter and over the last 12 months.
Australian Dollar movement is typically influenced by Chinese economic development, since it’s the countries key trade partner of its commodity-based exports; iron ore and coal.
The results could therefore influence GBP/AUD movement, providing an opportunity for Sterling gains on the back of weakening sentiment in the Australian dollar.
Clients with an upcoming requirement involving the AUD, can keep up to date with the latest releases by contact their account manager here at Foreign Currency Direct.
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