Australian Dollar to Pound Exchange Rate Recovers from Lows on Fresh Risk-Rally
Demand for the Australian Dollar (AUD) improved on Tuesday following weeks of poor performance, thanks to higher risk-sentiment in markets. The Australian Dollar to Pound (AUD/GBP) exchange rate recovered as a result.
Last week saw AUD/GBP slump from 0.5532 to 0.5447 as ‘trade war’ concerns dragged heavily on the Australian Dollar. On Monday, AUD/GBP briefly touched on a low of 0.5423, which was the pair’s lowest level since the 2016 Brexit vote.
Market hopes that there could be some kind of negotiation on trade between the US and China, rather than the nations provoking tension or sparking a global ‘trade war’, caused broad relief during Tuesday’s Asian session.
As a result, market demand for risk-correlated currencies like the Australian Dollar improved. This helped AUD/GBP to climb to its best levels since last week.
Australian Dollar (AUD) Gains Limited by Lack of Supportive Commodity or Domestic News
Despite market hopes that the US and China could talk out trade issues rather than spark a global ‘trade war’, prices of key commodities have remained weak so far this week.
Prices of iron ore, Australia’s most lucrative commodity, continued to fall throughout Monday.
While Chinese steel and iron ore futures rebounded slightly on Tuesday due to receding ‘trade war’ fears, the commodities still suffered major losses in March overall.
As a result, Tuesday’s rebound in futures did little to help the Australian Dollar.
On top of this, Australia’s February new home sales results did little to make the currency more appealing. The figure improved from -2.1% but still came in with a contraction of -0.7%.
Pound (GBP) Exchange Rates Rebound from Week of Strong Performance
Last week’s Brexit and Bank of England (BoE) developments significantly bolstered Sterling (GBP) support and the Pound outlook and were among the primary reasons for AUD/GBP losses throughout the week.
These factors continue to support the Pound and the currency could be in for stronger performance in the coming months. However, on Tuesday Sterling was knocked by the market risk-rally as well as month-end flows.
Investors took profit from the Pound’s big movements last week, by selling the British currency from its highs as March drew to an end. This could keep pressure on Sterling in the coming days too.
Australian Dollar to Pound (AUD/GBP) Forecast: UK Growth Results in Focus
If broad market risk-sentiment calms in the coming days, the Australian Dollar to Pound (AUD/GBP) exchange rate is more likely to be influenced by UK data towards the end of the week.
Thursday will see the publication of most of this week’s most influential ecostats.
Britain’s final Q4 2017 Gross Domestic Product (GDP) results will be published during Thursday’s European session. UK growth is currently projected to have slipped from 0.5% to 0.4% quarter-on-quarter and from 1.8% to 1.4% year-on-year.
The final Q4 UK business investment stats will also be published, as well as UK mortgage lending and mortgage approvals from February.
As for Australian data, the nation’s February private sector credit results will be published during Thursday’s Asian session. They are not expected to be particularly influential.
The Australian Dollar is more likely to be influenced by further developments on US and China trade stances. Any signs that a deal or agreement could be reached on US-China trade would relieve markets and make risky currencies like the ‘Aussie’ more appealing.
A stronger recovery in prices of iron ore may also support the Australian Dollar to Pound (AUD/GBP) exchange rate.