Australian Dollar to Pound Exchange Rate Tumbles as Global Trade Concerns Weigh
Anticipation for Brexit developments helped the Pound (GBP) push the Australian Dollar to Pound (AUD/GBP) exchange rate lower on Monday, following a plummet in the pair last week on global trade concerns.
AUD/GBP has seen significant losses since last week. The pair opened last Monday at the level of 0.5669 and shed over one pence to the level of 0.5532.
During yesterday’s European session the pair touched on a low of 0.5484 – the lowest AUD/GBP level since the 2016 Brexit vote.
This has been largely due to market concerns about the US Presidential administration’s increasingly protectionist stance on global trade, as well as concerns that the US could spark a ‘trade war’.
US officials have particularly taken aim at China, Australia’s biggest trade partner, worsening concerns that the US and China could clash over trade.
Pound (GBP) Exchange Rates Surge on Hopes for Breakthrough in Brexit Talks
UK and EU negotiators took a highly optimistic tone during Monday’s European session, ahead of a key EU summit towards the end of the week when markets were betting a post-Brexit transition period would be agreed.
It was reported on Monday that UK Brexit Secretary David Davis and EU Chief Negotiator Michel Barnier had jointly published a new version of the Brexit draft treaty, indicating wide agreement on key issues like citizen’s rights.
While there were still major disagreements left, including the issue of the border between Ireland and Northern Ireland, Pound investors were relieved that a UK-EU transition period seemed to be essentially agreed on.
With markets increasingly confident in the reality of a transition period, this means UK businesses will have time to prepare for life outside of the EU. There are also hopes that the UK government will be able to negotiate new trade deals during this period.
Australian Dollar (AUD) Exchange Rates Fail to Hold as Trade and Data Weighs
Other trade news has weighed on the trade-correlated Australian Dollar (AUD) so far this week, such as news that prices of iron ore, Australia’s most lucrative commodity, had weakened.
Iron ore prices saw steep losses at the beginning of the week due to weaker demand for iron ore and steel in China.
The Australian Dollar also failed to find support in domestic data over the past week. Australian consumer and business confidence stats were decent, but were not enough to boost the ‘Aussie’ amid persistent concerns over Australian wage growth.
Australian Dollar to Pound Forecast: AUD/GBP Losses Likely if Brexit News Continues to Impress
The week has barely just begun, but markets are already a lot more optimistic about the Brexit outlook due to the latest signs of breakthroughs in talks, as well as optimism from both sides of negotiations that a transition deal has been reached.
Further signs that the Brexit transition period is secured could help Sterling to extend or at least hold its gains for the rest of the week. Notable developments are still possible during the EU summit from the 22nd to the 23rd of March.
Either way, with key UK datasets like inflation and wage growth, as well as a Bank of England (BoE) policy decision due this week, Sterling is likely to drive AUD/USD movement.
Still, Thursday’s Australian job market results could be influential for Australian Dollar trade, especially if it helps the currency to bounce back from its slump.
Of course, any new developments on US trade or the possibility of a ‘trade war’ are also likely to influence movement in the risky Australian Dollar to Pound (AUD/GBP) exchange rate.