Australian Exemption from US Metal Tariffs Boosted Australian Dollar Exchange Rates
Confirmation that Australia will be temporarily spared from the Trump administration’s incoming tariffs on steel and aluminium left the Pound to Australian Dollar (GBP/AUD) exchange rate on a weaker footing.
While the risk of a trade war between the US and China continued to heat up the appeal of the Australian Dollar (AUD) nevertheless improved, capitalising on a weakening of the US Dollar (USD).
Even though a deterioration in global trade conditions would have a negative impact of the exposed Australian economy this was not enough to weigh on demand for the antipodean currency ahead of the weekend.
This leaves the Australian Dollar vulnerable to downside pressure, however, if the US shift towards protectionism continues unabated.
Pound Exchange Rates Lose Momentum Over Lack of Fresh Brexit Progress
The GBP/AUD exchange rate lost further momentum as the initial positive impact of the Bank of England’s (BoE) more hawkish policy meeting rapidly dissipated.
After making strong gains over the course of the week, having pushed the GBP/AUD exchange rate to its best level since the EU referendum, the Pound (GBP) struggled to find any further support.
Investors were instead encouraged to engage in some profit-taking against the Pound, with the uncertainties surrounding Brexit still casting a significant shadow over the domestic outlook.
No additional progress was anticipated to result from the latest EU summit, as analysts at TDS noted:
‘We don’t expect sign-off on the 123-page withdrawal agreement, but leaders are likely to announce a “political agreement” finalising the content of the 5-page transition deal contained within. A positive move, but with “nothing agreed until everything is agreed” (legally, anyways), there remains a good deal of work ahead.’
As long as Conservative backbenchers continue to push back against the draft UK-EU Brexit treaty published at the start of the week the upside potential of GBP exchange rates is forecast to remain somewhat limited.
Rising Private Sector Credit Forecast to Bolster Australian Dollar Exchange Rates
With fresh Australian data rather thin on the ground in the coming week downside pressure on the GBP/AUD exchange rate could be muted.
Thursday’s private sector credit figures may still offer the Australian Dollar a rallying point, however, if the data shows a solid uptick.
Signs that confidence amongst domestic consumers is improving should boost the appeal of AUD, giving the Reserve Bank of Australia (RBA) at least some cause for increased optimism.
On the other hand, if growth in credit falls short of forecast this is likely to weigh heavily on the Australian Dollar, at least in the short term.
Ongoing worries over the future of global trade may equally dampen demand for the antipodean currency, particularly if the US and China start to impose tit-for-tat tariffs in earnest.
After hitting its recent highs, though, the GBP/AUD exchange rate may struggle to find additional headroom at this stage, barring any significant domestic developments.
Comments are closed.