The Australian Dollar Pound exchange rate plummeted last week as traders turned bearish on risky currencies due to the surprise US election win of Donald Trump. The ‘Aussie’ was bought from its cheapest levels on Monday, but AUD GBP remained near its worst levels since the beginning of October and trended near 0.60.
Australian Dollar (AUD) Supported by Iron Ore Price Surge
While investors have remained relatively wary on risk-correlated currencies since last week’s US election result, the quiet hours of Monday morning trade saw many traders buying risky currencies from their lowest values after last week’s plummets.
With the next four years of the US economy plunged into uncertainty after electing the protectionist and potentially anti-trade Trump as its next President, indulging in risk has been the last thing on many investors’ minds.
However, as Trump has indicated he intends to reintroduce mining jobs in the US, commodities such as iron ore have surged in price. This has limited falls of the iron ore-correlated ‘Aussie’.
Pound (GBP) Holds Ground on Trade Deal Hopes
The Pound saw one of its best performances in months last week, becoming bullish in response to Trump’s election win due to hopes of stronger trade-relations between the UK and US.
Trump and his transition team indicated to the press and to UK Prime Minister Theresa May that he heavily valued the UK’s relationship with the US and was looking forward to strengthening UK-US ties.
This led many to hope that a new UK-US trade deal would indeed be a priority for the Trump administration. Not only did this speculation lessen post-Brexit fears slightly, it has helped the Pound hold its ground near its best levels in weeks.
Australian Dollar Pound Exchange Rate Forecast to Resume Downward Bias
AUD GBP recovered slightly on Monday as investors bought the ‘Aussie’ at its cheapest levels, but this upward momentum is unlikely to last and could easily run dry in the next day or so.
It is highly likely that investors will continue to hold a generally risk-averse stance with Trump’s trade outlook still unclear. If clarity comes in the form of indication that Trump will be more moderate on trade than he had been on the campaign trail, the ‘Aussie’ could recover.
However, if Trump or his team hint that he still intends to heavily wind back free trade, risk and trade-correlated currencies like the Australian Dollar will continue to plunge.
The Pound’s strength will also be a key part of how AUD GBP performs going forward. If it becomes clear that what Trump has in mind for UK trade doesn’t match the intentions of the UK government, Sterling could give up some of its recent value.
At the time of writing, the Australian Dollar Pound exchange rate trended in the region of 0.60 while the Pound Australian Dollar exchange rate traded at around 1.66.