The Pound Australian Dollar exchange rate has advanced in the last week despite weakness in the Pound, as investors hesitate to buy into the risky Australian Dollar due to the protectionist rhetoric of US President Donald Trump. GBP AUD gained over two cents throughout the week and ended near the level of 1.66.
Pound (GBP) Outlook Improves Despite High Uncertainty
Last week was generally a good one for the long-term British Pound outlook.
The UK Supreme Court ruled in agreement with the High Court that Article 50 must be activated through Parliament rather than by the UK government. UK Prime Minister Theresa May followed by announcing the government would publish a Brexit ‘white paper’ detailing its EU divorce plans for MPs.
Market hopes also increased that the UK and US would have a closer trade relationship under the US Trump administration and it was confirmed that Theresa May would become the first world leader to meet with the new President this weekend.
The above supported GBP trade for most of the week and improved long-term British trade outlooks
However, concerns grew about how the UK economy would perform through the Brexit process itself as it was revealed Britain’s economic growth was being almost entirely propped up by the nation’s services sector.
Australian Dollar (AUD) Slumps as Markets Fear Easing from RBA
The Australian Dollar has seen a poor performance over the last week as the long-term outlook for the currency appeared to worsen.
Market demand for risk-correlated currencies like the ‘Aussie’ plunged during the first week of the Trump Presidency as Trump quickly took a protectionist stance on trade and withdrew the US from TPP completely.
As traders had hoped President Trump would be more pragmatic than campaign Trump, this came as a surprise to some investors and as a result markets sold the ‘Aussie’ in favour of safer investments.
Another long-term downside risk came in the form of Australian inflation concerns. The week’s Australian consumer price index (CPI) disappointed investors and increased concerns that the Reserve Bank of Australia (RBA) may return to an easing bias in the year ahead.
Pound Australian Dollar Forecast: Bank of England Meeting could alter Long-Term GBP Outlook
The Pound’s outlook improved significantly last week, but as with all Brexit uncertainties this could shift depending on new developments.
Next week will see the Bank of England (BoE) hold its first policy decision of 2017. However, with Brexit uncertainty high and the recent GDP figures indicating that Sterling’s value may hit economic growth, the bank may not be as optimistic as hoped.
Investors continue to hope that the surge in consumer prices caused by Sterling’s post-referendum fall in value will pressure the BoE to hike interest rates, but the bank has stated in the past that rates may need to remain low to accommodate for potential economic crises.
As a result, long-term Sterling outlooks may worsen if the bank indicates that Britain’s growth could slow significantly in the coming months.
As for the Australian Dollar, continued trade news from US President Trump as well as developments in the commodity markets will be the primary influences of long-term movement next week.
If Trump doesn’t improve his stance on Australasian trade, the Australian Dollar could see a long-term bearish underlying trend.
GBP AUD Interbank Rate
At the time of writing, the Pound Australian Dollar exchange rate trended in the region of 1.66, while the Australian Dollar Pound exchange rate traded at around 0.60.
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