Lacklustre Australian Trade Balance Bolsters GBP/AUD
The Pound Australian Dollar (GBP/AUD) exchange rate rallied this morning as markets reacted to Australia’s latest trade figures.
The GBP/AUD exchange rate rallied by around 0.29% or half a cent during the Asian session this morning in the wake of Australia’s trade balance.
Australian Dollar (AUD) Plummets as Trade Figures Likely to Hurt Q4 Growth
The Australian Dollar fell sharply against the Pound today as Australia unexpectedly posted a trade deficit in November
According to data published by the Australian Bureau of Statistics (ABS), Australia imports outpaced exports in November causing the domestic trade balance to tumble to -AU$0.6bn, this was a considerable miss from forecasts that it would have instead climbed to AU$0.5bn.
Further denting AUD was the revision of October’s trade balance down from AU$0.1bn to -AU$0.3bn.
Most crucially however is that analysts suggest that the two consecutive trade deficits in October and November are likely to drag on economic growth in the final quarter of 2017.
Given the underperformance of GDP in the third quarter this is likely to become a notable concern for investors going forward.
Kate Hickie, Economist at Capital Economics, said;
‘Even if the trade balance did recover in December, the weak start to the quarter means that net trade probably made a negative contribution to GDP growth in the fourth quarter of last year following a neutral contribution in the third quarter.’
Sterling (GBP) Strengthened by Modest Outlook
At the same time the Pound has been lifted this morning by a relatively upbeat outlook for the currency in 2018.
Analysts polled by Reuters suggest that while Sterling is unlikely to see any major gains over the next twelve months, it is also unlikely to beset by any considerable weakness either, although they did warn that Brexit could still hamper GBP.
Analysts at Investec said;
‘To us, the UK currency remains fundamentally undervalued and markets are still pricing in a generous set of Brexit related risks.’
GBP/AUD Forecast: UK Trade Balance to be in Focus Next Week
Looking ahead to next week the GBP/AUD exchange rate may be forced to relinquish some of its recent gains on Wednesday as the UK releases its own trade balance, with economists forecasting that the UK trade deficit is likely to have grown again in November.
Meanwhile the biggest Australian data release next week will be NAB’s Business Confidence figures, with a possible rise in sentiment likely to strengthen the Australian Dollar.
However possibly undermining this will be the release of Australia’s November Retail Sales figures, with markets likely to pay close attention to the data given the retail sectors poor performance over the last couple of months.
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