This week has seen GBP AUD and GBP NZD exchange rates advancing as various domestic and global factors have weakened demand for the antipodean Australian Dollar and New Zealand Dollar. While Brexit concerns remain on the minds of investors, the Pound has tested multi-month highs against both and continues to edge higher on Tuesday.
Pound Australian Dollar Exchange Rate Gains on Australian Growth Fears
GBP AUD has already seen significant fluctuations this week. The pair plunged on Monday as traders bought the ‘Aussie’ currency ahead of Tuesday’s Reserve Bank of Australia (RBA) meeting.
However, the RBA’s final meeting of 2016 was relatively uneventful and officials expressed an unconcerned expectation that the country’s economy would likely perform poorly towards the end of the year.
With Australia’s Q3 GDP results due to publish on Wednesday, forecasters began to speculate that the economy may have contracted for the first time in five years.
This, as well as high US inflation expectations kept demand for the ‘Aussie’ low and allowed GBP AUD to advance despite the UK government’s Supreme Court appeal causing some GBP trade jitters in the early week.
Pound New Zealand Dollar Exchange Rate Advances on NZ Leadership Uncertainty
GBP NZD has already seen considerable volatility this week. The pair hit a two-month-high on Monday and neared the key level of 1.80, but faced significant resistance despite low demand for the New Zealand Dollar this week.
The ‘Kiwi’ has been sold this week following news that New Zealand’s Prime Minister, John Key, had suddenly resigned from his role. While many suspect his successor will be Deputy PM Bill English, this period of uncertainty has certainly left the New Zealand Dollar weaker.
General demand for risk-correlated currencies has also been low this week, as oil prices begin to slip from their OPEC rallies and high expectations for next week’s Federal Reserve meeting keep risky antipodean currencies weak.
GBP AUD, NZD Exchange Rate Long-Term Forecasts: Can Pound Recover to Best Post-Brexit Levels?
GBP AUD and GBP NZD exchange rates are likely to continue strengthening in the coming weeks due to many factors, most of which are global and will mean lower-demand for risk-correlated currencies in the short to mid-term at least.
Most vitally, it’s now widely expected that the Federal Reserve will hike US interest rates in its meeting next week.
Higher US inflation means lower spreads for risk-correlated currency investment, so the expectation not just for higher US interest rates next week but also gradual US rate hikes over the next year will be a considerable long-term factor weighing on GBP AUD and GBP NZD.
The Australian Dollar in particular will also be pressured in the coming weeks if Wednesday’s Q3 Australian growth figures print a contraction as some forecast. This will concern many traders until data begins to mark an improvement.
The biggest long-term concern about the New Zealand Dollar for the time being is the possibility that New Zealand’s next Prime Minister may change John Key’s policies, so leadership updates are sure to be important to NZD trade.
As for the Pound, it could continue to advance in December as soft-Brexit hopes continue, with Supreme Court unlikely to announce its decision until the New Year.
At the time of writing, the Pound Australian Dollar exchange rate trended in the region of 1.71, while the Pound New Zealand Dollar exchange rate trends near 1.79.
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