A surprise improvement in the fourth quarter Australian export prices index was not enough to keep the Pound to Australian Dollar (GBP/AUD) exchange rate from rallying.
Although forecasts had pointed towards another negative quarterly export figure the Australian Dollar (AUD) failed to take encouragement from the 5.5% uptick.
On the other hand, as UK car production saw a smaller contraction on the year than forecast in December this offered some support to Pound Sterling (GBP).
While signs still suggest a level of weakness within the UK manufacturing sector the GBP/AUD exchange rate held onto a positive footing, temporarily shaking off worries over the economic outlook.
With forecasts suggesting a static monthly uptick in December’s Australian private sector credit reading AUD exchange rates may struggle to find much support ahead of the weekend.
As long as investment within the Australian economy remains decidedly muted the likelihood of a stronger bounce back in growth looks set to diminish.
The latest bout of global anxiety over Covid-19 infections and the spread of new strains of the virus could also keep the risk-sensitive Australian Dollar on the back foot in the days ahead.
Fears that the global economy could take longer to recover from the pandemic than previously thought may easily drag AUD exchange rates lower across the board.
On the other hand, if Friday’s set of US economic data falls short of expectations this could offer the Australian Dollar a boost on the back of fresh US Dollar (USD) weakness.
Worries over the health of the UK economy could pick up further, meanwhile, with the release of the latest Nationwide housing price index report.
Investors expect to see growth in housing prices slow on the month in January, dipping from 0.8% to 0.2%.
Evidence of the housing market losing some of its earlier resilience in the face of the latest national lockdown could see the Pound fall out of favour.
As long as signs continue to point towards a weakening sense of optimism among UK consumers the potential for further GBP/AUD exchange rate gains appears limited.
On the other hand, if the housing market is able to hold onto its positive footing even in the face of the tightened social restrictions this may encourage the Pound to push higher across the board.
Even so, as long as the UK economy appears to remain on course to experience a fresh growth contraction in the first quarter of 2021 this could keep a lid on any further Pound upside in the days ahead.
Written by FTG, Author from Investing
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