Foreign Investment Watchdog Boosts AUD/GBP Rate by Promoting Chinese Input
On a relatively quiet day for Australian economic data, the Australian Dollar to Pound exchange rate has risen by 0.4% thanks to AUD trader optimism.
The latest cause of support has been the assessment by the Foreign Investment Review Board (FIRB) that Chinese investment is worthwhile.
Australia has long had China as its largest trading partner, but the issue of Chinese investors buying into the Australian economy hasn’t always sat well with AU politicians.
FIRB Chairman David Irvine has downplayed these concerns, stating;
‘Having a largest economic partner who is not a traditional ally, that’s I think one of the big challenges of Australian foreign policy.
It’s somewhat understandable, but I think it’s a mistake to look at foreign investment in Australia only through the prism of Chinese investment and of developments in Australia-China relations.
The facts are that Australia has always welcomed and indeed encouraged foreign investment into our country. We’re a capital-importing country’.
This outlook could go some way to improve perceptions of Chinese influence in Australia in the future.
Such reparations are especially important in the wake of scandals, such as that involving Labor Party member Sam Dastyari in 2016.
Pound to Australian Dollar Exchange Rate Drops -0.4% as UK Household Spending Slumps
The latest Pound to Australian Dollar (GBP/AUD) exchange rate movement has been firmly negative, with Sterling falling by -0.4% in the pairing.
Despite this, however, the GBP/AUD exchange rate still remains near its highest level since June 2016.
The day’s UK economic data has been unsupportive, consisting of reports that national household spending has reached its slowest annual rate in six years.
This has had negative implications for a number of aspects of the UK economy, beyond the retail sales sector.
The spending stats came as part of a wider release of GDP data for Q4 2017, which showed a slowdown compared to Q3 2017 and Q4 2016.
Economists were divided about what the data meant for future UK economic growth. Howard Archer of EY Item Club suggested that GDP levels could pick up again;
‘Growth in 2018 should be helped by the squeeze on consumers easing as the year progresses with earnings growth firming and inflation easing back.
Agreement on a Brexit transition arrangement should also be supportive to business investment.
However, ongoing uncertainties over the future trade relationship between the UK and EU will likely still limit the upside for investment’.
Australian Dollar to Pound Exchange Rate Forecast: Will AUD/GBP Recover on RBA Minutes?
The Australian Dollar could start to claw back lost ground against the Pound in the week ahead, when the Reserve Bank of Australia (RBA) will hold a monetary policy meeting.
Policymakers aren’t expected to adjust interest rates from their current level of 1.5%, but could still influence the AUD if they discuss economic expectations.
For context, Australian Dollar traders have been waiting for an RBA interest rate hike since the rate was last raised in November 2010.
If RBA officials suggest that wage growth (which affects interest rate hike odds) is likely to pick up in the future, then the Australian Dollar could rally.
Conditions for an AUD/GBP exchange rate rise could improve further next week when the UK’s PMI activity readings for March are released from 3rd April to 5th April.
Economists have predicted that levels of manufacturing, construction and services sector activity will all decline, which could result in the Pound falling in value.
A larger-than-expected services sector slump could prove especially bad for Sterling, as services are considered the largest individual contributor to national economic growth.