Concerns about 2018 US Rate Hikes Cause to Australian Dollar to Pound Losses
This has been the release of Federal Reserve minutes, which show that ‘all’ members at the US central bank see room for more interest rate hikes in 2018.
This ties into Australian Dollar movement because the US Dollar typically rises in value when interest rates are hiked; in turn this lowers Australian Dollar demand.
Hints of Improving AU Wage Growth Fail to Trigger AUD/GBP Exchange Rate Rise
There has been a positive economic forecast from Reserve Bank of Australia (RBA) Governor Philip Lowe recently, but this hasn’t been enough to raise the AUD/GBP exchange rate.
Mr Lowe has suggested that Australia’s long-term glacial pace of wage growth could come to an end shortly, with an acceleration expected from here on out.
Among other factors, slow wage growth has been one consideration that has prevented RBA policymakers from planning to raise national interest rates.
On the matter itself, Mr Lowe has predicted that;
‘The latest data suggest that the rate of wages has now troughed, with a pick-up evident in the most recent quarter.
‘A further lift is expected, but it is likely to be only gradual’.
This closing statement has been the caveat to Mr Lowe’s forecast, as it fits the RBA’s existing narrative of economic conditions improving steadily but slowly.
Pound to Australian Dollar Advance Triggered by Rising Hopes for Global Conflict De-escalation
The recent Pound to Australian Dollar (GBP/AUD) exchange rate rise is primarily down to external factors rather than any especially positive UK economic news.
The Euro has tumbled after the release of cautious European Central Bank (ECB) minutes, which have raised demand for the comparatively more stable Pound.
Domestically, there have been warnings that Q1 2018 UK GDP growth could be even worse than first estimated, even factoring in extremely poor weather.
Reflecting the poor conditions at home, the present GBP/AUD exchange rate of 1.8335 only represents a recovery towards the week’s starting high of 1.8452.
Australian Dollar to Pound Exchange Rate Forecast: Are AUD/GBP Losses ahead on RBA’s Stability Review?
The recent Australian Dollar to Pound losses might expand in the near-term, when the Reserve Bank of Australia’s (RBA) financial stability review is released.
This bi-annual snapshot of the Australian economy might reveal concerns among RBA policymakers about the potential damage that a US-China trade war could do.
Although Australia is not expected to be directly caught up in such an event, there are still concerns that as a side-effect of the trading clash the Australian economy will suffer.
Fears about a trade war had previously taken a back seat due to an increased focus on the possibility of a US military intervention in Syria.
This doesn’t mean that the risks of a trade war have completely diminished, however, so if it is brought up again by the RBA’s review then the Australian Dollar could tumble.
Further ahead, the Pound to Australian Dollar exchange rate could turn highly volatile over the coming week when UK earnings, inflation and unemployment data is released.
If wage growth slows and inflation levels rise again as forecast, then the Pound could tumble because this might lower the odds of a May Bank of England (BoE) interest rate hike.