The GBP to AUD pair has turned lower today and risks testing the support of the recent trading range. Today’s release from the U.K. saw construction PMIs come in lower at 54.6 versus expectations for 58.5. The data suggests that the construction sector is not expanding as quickly as hoped.
The move lower in the pound will disappoint the bulls after Australian GDP came in slightly lower than expected on Wednesday. Year-on-year growth came in a percentage point lower than expected but the Reserve Bank surprised the market a day earlier with an increase in the term funding programs for banks to to get low rate loans for three years.
Next week sees the U.K. return to Brexit talks with the European Union and this could bring some headline risk for the pound. The EU’s chief negotiator has already said that the chance of a deal is slim ahead of the September 7th meeting and The Times newspaper said that the chance of a deal is 30-40% by the end of the year according to government sources.
Markets are also on the lookout for further stimulus measures from the U.K. and Australia. RBA Governor Philip Lowe has already stated that 0.25% interest rates are the floor for the Aussie, while the U.K. interest rate is at 0.1%. Next Friday sees the U.K. release estimates for third quarter GDP and this will go a long way to help the market decide which path to take with the GBP to AUD currency rate. All developed economies took a Q2 hit from the lockdowns, but the key will be the pace of recovery into year-end.
The GBPAUD pair has been trading in a range since the beginning of August and after a push towards 1.8300, the move today could set up a reverse to test the support near 1.81250. A close below that level would open a bigger move towards the 22nd July lows at 1.7700. Stop losses for shorts would be placed at 1.8300 if the market closes under 1.8200 today.
