Pound (GBP) Exchange Rates Boosted by Talk of Fast-Tracked US-UK Trade Deal
Risk aversion gained steam as the results of the US presidential election continued to sink in, although the Australian Dollar (AUD) proved relatively resilient. With copper prices having soared to their highest level since July 2015 the appeal of the ‘Aussie’ was only somewhat muted, allowing the antipodean currency to make gains against some of its rivals. However, as the outcome of Donald Trump’s election remains decidedly unclear, given the eclectic and divisive nature of his campaign promises, the appeal of the higher-risk antipodean currency has remained fragile.
On the other hand, the Pound (GBP) has benefitted strongly from the fallout of the US election. Confidence in Sterling has been boosted by fresh indications that the UK would be at the front of the queue when it comes to negotiating a new trade deal with the US, something which eased Brexit fears. Stronger-than-expected house price and construction output data offered further support to the Pound Australian Dollar (GBP AUD) exchange rate ahead of the weekend.
GBP AUD Exchange Rate Forecast: Global Political Developments and Brexit Court Case to Provoke Further Volatility
Naturally global market sentiment and ongoing developments in the US political landscape are likely to remain the primary influence on the GBP AUD exchange rate over coming weeks. Should there be further signs of Trump toning down his campaign rhetoric and shaping into a less radical President then markets could return to a more optimistic attitude. Nevertheless, any increase in risk appetite looks to be short-lived at best, given the elevated levels of political uncertainty that now dominate the general outlook.
Demand for the Pound could weaken in anticipation of Chancellor of the Exchequer Philip Hammond’s first Autumn Statement, with investors nervous to see the extent to which the Chancellor has adjusted fiscal policy. Given the size of the UK’s trade deficit and public borrowing Hammond may struggle to deliver any particularly major shake-up, which could lead to market disappointment. However, as Jack Di-Lizia, strategist at Deutsche Bank, noted:
‘The upcoming Autumn Statement is likely to only lead to a modest rise in financing requirement which should limit market impact. We would expect the additional financing to be split between up to GBP 5bn of additional t-bill sales and the remainder allocated to Gilts in line with the current bucket distribution.’
A more significant impact on the GBP AUD exchange rate is likely to stem from the Supreme Court hearing of the Article 50 case. If the High Court ruling that parliament must be involved is overturned then the Pound is likely to slump sharply, with the odds of a hard Brexit increased by such a result.
Current Interbank Exchange Rates
At the time of writing, the Pound Australian Dollar (GBP AUD) exchange rate was on a bullish run in the region of 1.66, while the Australian Dollar Pound (AUD GBP) pairing was slumped at 0.59.
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