Australian Dollar to Pound Exchange Rate Knocked by US Trade Fears
Despite Brexit uncertainties hitting headlines again since last week, the Australian Dollar to Pound (AUD/GBP) exchange rate fell throughout Monday trade and could see further losses in the coming days.
Due to market concerns about Australia’s economy and ramped up protectionist rhetoric from the US, AUD/GBP was unable to hold its best levels of 0.5657 last week. The pair instead only edged higher from 0.5615 to 0.5625 throughout the week.
On Monday AUD/GBP continued to fall from last week’s high and trended near a low of 0.5600 at the time of writing.
The primary reason for the pair’s losses has been risk-off movement, as investors are anxious about global trade following increased protectionist rhetoric and action in the US since last week.
The US Presidential administration announced that it planned to introduce strict tariffs on US imports of steel and aluminium. As Australia is an export-heavy nation, concerns that these tariffs could affect Australia made the risky Australian Dollar (AUD) unappealing.
The US President has also indicated that the US could fight and win a ‘trade war’, making markets even more anxious that a trade war could be possible.
Pound (GBP) Exchange Rates Bolstered by UK Services Results
The Pound’s (GBP) gains against the Australian Dollar were boosted on Monday by the latest UK ecostats, which beat expectations and left markets hopeful that Britain’s economy was more resilient than expected.
Markit’s UK services PMI was forecast to have edged higher from 53 to 53.3 in February, but instead jumped to 54.5 – the print’s best result in four months.
British services were boosted by growth in new businesses hiring more workers. This helped to boost the services sector, despite hesitant consumer activity amid Brexit uncertainty and the ongoing UK pay squeeze.
As a result of the stronger UK services results, the composite PMI also beat expectations despite poor manufacturing data last week. The figure was expected to come in at 53.6 but instead rose to 54.5.
These figures helped the Pound to recover against a weak Australian Dollar despite investors remaining anxious about fresh disagreements in UK-EU Brexit negotiations.
Concerns that Brexit talks could fall through or lead to a ‘hard Brexit’ with no transition period limited the Pound’s potential for gains against rival currencies.
Australian Dollar to Pound (AUD/GBP) Forecast: Reserve Bank of Australia (RBA) Decision in Focus
Could the Australian Dollar to Pound (AUD/GBP) exchange rate see stronger demand this week? That highly depends on what tone the Reserve Bank of Australia (RBA) takes in its March policy decision – which will be held on Tuesday.
Analysts are hoping for the RBA to comment on recently disappointing Australian data, as well as the US Presidency’s plans for stricter trade tariffs.
If the bank takes a more dovish stance on Australia’s economic outlook or monetary policy due to recent Australian data or US trade war concerns, the Australian Dollar to Pound (AUD/GBP) exchange rate is likely to fall further in the coming days.
More key Australian data could inspire ‘Aussie’ movement later in the week including Q4 Gross Domestic Product (GDP) results and January trade figures.
However, these are unlikely to make the Australian Dollar particularly more appealing unless they are highly impressive.
As for the Pound, Brexit developments will unsurprisingly drive Sterling for much of the week. Friday’s UK trade, manufacturing and industrial production figures could also influence the British currency.