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Australian Dollar Slides against the Pound as Markets Ignore Strong Trade Surplus

Pound Sterling Exchange Rates

On Thursday, the Australian Dollar fell slightly against the Pound, trading down at 0.5865. This decline came from Australian news earlier in the week; more recent ecostats have been much more positive.

Pessimism about RBA Rate Decisions Drags Australian Dollar Down

By all accounts, the Australian Dollar should have appreciated against the Pound on Thursday’s trading session. As well as there being little UK data to speak of, the Australian trade balance for May also rose sharply.

Forecasts had been for a trade surplus expansion from 0.09bn to 1.1bn, which made the actual rise to 2.471bn an even more supportive result. The slight downside was that the 0.09bn result for April was a revision down from 0.555bn.

Any AUD gains proved short-lived, however, with trader concerns about the Reserve Bank of Australia (RBA) proving to have a greater negative drag on the AUD GBP exchange rate.

The RBA had been forecast to drop some hints of a near-term Australian interest rate hike, so the absence of such remarks proved highly disappointing to traders.

Pound Gradually Gains on Raised Hopes of Brexit Trade Deal

Sterling’s appreciation against the weaker Australian Dollar has partly been caused by higher hopes of a good Brexit deal.

Although the EU’s Michel Barnier has warned that the UK cannot have ‘frictionless trade’ after Brexit, traders have paying closer attention to comments from the UK.

Speaking at an event for Reuters, former Bank of England (BoE) official Andrew Bailey stated that the UK may be able to leave the UK and still secure a good trade deal. Discussing the key question of what Brexit talks could bring for the UK, Bailey declared that;

‘Some of the commentary on Brexit suggests that it must inevitably lead to restrictions on trade, restrictions on the location of activity in financial services and therefore restrictions on open markets.

I want to address whether restricting trade is an inevitable or indeed necessary response to Brexit and in the interests of anyone. I hope you’ll not be surprised that my answer to these questions is no, it is not’.

AUD GBP Forecast: Slim Chances of Australian Dollar Recovery on Construction Stats

The Australian Dollar may be able to rebound against the Pound before the weekend, if Friday’s AIG construction index rises significantly.

Higher construction would equate to more houses being built, which could go some way to reducing the size of Australia’s current housing bubble.

The last big UK announcement will be trade balance results, also out on Friday. No forecasts have been made, but a reduction in the -2.05bn deficit posted in April may trigger further GBP AUD gains.

Recent Interbank AUD GBP Exchange Rates

At the time of writing, the Australian Dollar to Pound (AUD GBP) exchange rate was trading at 0.5862 and the Pound to Australian Dollar (GBP AUD) exchange rate was trading at 1.7055.