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Australian Dollar to Pound Exchange Rate Forecast: Can Risk-Sentiment Keep AUD/GBP High Despite Trade War Fears?

Australian Dollar Exchange Rates

Australian Dollar to Pound Exchange Rate Climbs on Risk-Sentiment despite Trade War Concerns

Risk-sentiment has been heavily mixed over the last week due to a stricter tone on trade from the US Presidency and hopes for diplomacy from North Korea, but the Australian Dollar to Pound (AUD/GBP) exchange rate advanced at the end of the week regardless.

After fluctuating between lows of 0.5591 and highs of 0.5638 throughout the week so far, AUD/GBP put in more solid gains on Friday. During the European session, AUD/GBP touched on a weekly high of 0.5649.

The Australian Dollar’s (AUD) late-week gains were caused largely by market demand for risk-correlated currencies.

Over the past week, the isolated nation of North Korea agreed to hold a summit for talks with South Korea in April and during Friday’s Asian session even agreed to talks with the US.

North Korea’s leader has agreed to meet with the US President in person in May, despite the regular hostility between the two throughout 2017.

It has been hailed as a milestone meeting that has bolstered market hopes for more diplomatic solutions to the potential threat of military action from either nation. This left investors a lot less nervous and the risky Australian Dollar strengthened.

This was despite market concerns about the US Presidency’s plans for stricter tariffs on US imports. The US President has hinted that Australia could be exempt from tariffs which made investors less hesitant to buy the ‘Aussie’ either way.

Pound (GBP) Exchange Rates Pressured by Underwhelming UK Ecostats

Following days of market anxiety that the UK and EU may fail to agree to a major post-Brexit transition period deal for Britain, the Pound (GBP) has also been weighed by UK data on Friday.

Friday saw the publication of Britain’s January trade balance results, as well as manufacturing and industrial production figures.

Britain’s trade deficit came in at £-3.074b in January, though the previous figure was revised up from £-4.896b to £-2.492b.

Manufacturing production and industrial production unfortunately fell short in every notable print however.

Manufacturing was forecast to slip to 0.2% month-on-month but fell from 0.3% to 0.1%. The yearly figure only came in at 2.7% and missed the forecast 2.8%.

Industrial production was similarly disappointing. The monthly figure missed the forecast 1.5%, printing at 1.3%. Meanwhile the yearly industrial production figure slipped to 1.6% rather than the expected 1.8%.

Australian Dollar (AUD) Bolstered Slightly by Trade Data

The possibility for the US Presidential administration to exempt Australia from its strict trade tariffs would be a big relief for Australian Dollar investors, as Australia’s latest trade results have been optimistic.

Thursday saw the publication of Australia’s January trade balance results, which beat A$0.3b expectations and improved to A$1.055b.

This was due to a jump in exports. Australian exports doubled from 2% to 4% in January while imports contracted at -2%.

On the other hand, some major Australian growth data was disappointing earlier in the week.

The Australian Dollar may have performed even better if Wednesday’s Australian Gross Domestic Product (GDP) results from Q4 2017 hadn’t fallen short of expectations.

Australian Dollar to Pound (AUD/GBP) Forecast: Political News Remains in Focus

Some Australian ecostats will be published next week, but the Australian Dollar to Pound (AUD/GBP) exchange rate is more likely to be driven by political news and market risk-sentiment.

For example, further signs of relations thawing between North Korea and South Korea or the US would make investors even more comfortable buying risky currencies like the Australian Dollar.

On the other hand, if the US Presidential administration ramps up its protectionist rhetoric and indicates that Australia may not be exempt from trade tariffs, this could weigh heavily on the ‘Aussie’.

Brexit developments are most likely to drive the Pound. If UK and EU negotiators appear to be closer and more confident to agreeing to a post-Brexit transition period, this will leave investors a lot less hesitant to buy Sterling.

As for data, Australian consumer and business confidence surveys will be published throughout the week.

Britain’s economic calendar will be quiet, but the UK Treasury is expected to present its Spring Statement on Tuesday.