The Australian Dollar Pound 2016 exchange rate plunged on Wednesday as markets bought Sterling in relief after a less bearish than expected Autumn Statement from UK Chancellor Hammond. The risky ‘Aussie’ failed to hold back its gains, leaving AUD GBP to fall to 0.59 from its weekly high of 0.60.
Australian Dollar (AUD) Demand Supported by Revived Iron Ore Bullishness
Demand for the Australian Dollar was muted on Thursday as the risky commodity-correlated currency was given a boost thanks to iron ore price rallies, but weighed on by the bullishness of the ‘safe haven’ US Dollar.
The ‘Greenback’ has performed consistently strongly in recent weeks and despite its strength fading it has stayed in high demand thanks to bets of a December Federal Reserve rate hike.
This has kept support for risk-correlated currencies like the ‘Aussie’ weak. The ‘Aussie’ was able to edge higher against the Pound on Thursday but this was largely due to higher iron ore prices and the Pound easing back slightly from its Wednesday rally.
Pound (GBP) Surges after Autumn Statement
Sterling saw a solid recovery from its worst weekly levels on Wednesday after UK Chancellor Philip Hammond had wrapped up his first budget statement in the role.
The Autumn Statement was more subdued than some analysts had expected and less bearish than many investors feared, which allowed the Pound to easily recover from the Autumn Statement jitters it felt earlier in the week.
Traders were particularly cheered by news that the UK government planned to direct much of its spending towards infrastructure and innovation for the next five years, despite news that the UK would see a deepening budget black hole as a result of the Brexit.
While some analysts stated that the Statement indicated the government still had very little actual plan for how the Brexit process would be carried out, the news helped many investors feel secure that some safety nets were in place to keep the economy growing in the next five years.
Australian Dollar Pound 2016 Forecast: USD Strength to Continue Weighing on ‘Aussie’ Potential
While it’s possible the Australian Dollar will continue to edge higher and recover against the Pound in the coming days and weeks, the enduring strength of the US Dollar is positioned as a constant limit to AUD advances.
Even as local factors and trade factors like strong iron ore prices support AUD, USD strength as well as expectations of a December Fed rate hike and potentially weaker US-AU trade relations will continue to be mid to long-term weights on ‘Aussie’ trade.
This means that, even if the Pound cools considerably from this week’s rallies and Brexit fears begin to weigh on GBP movement once more, the UK currency could continue to advance against the Australian Dollar.
At the time of writing, the Australian Dollar Pound 2016 exchange rate trended in the region of 0.59, while the Pound Australian Dollar exchange rate traded at around 1.68.