Australia Secures Exemption from US Tariff Measures – Australian Dollar (AUD) Exchange Rates Find Support
The Australian Dollar to Pound Sterling (AUD/GBP) exchange rate fluctuated on Monday, rising in the early hours on news that Australia has successfully secured exemption from US President Donald Trump’s steel and aluminium tariffs, but coming under pressure later into the day as anticipation built for tomorrow’s UK Spring Budget Statement.
After ongoing discussions between the two nations both President Donald Trump and Australian Prime Minister Malcolm Turnbull reached agreement late last week, with Australia now exempt from the US 25% tariff on steel, and the 10% tariff on aluminium.
‘Great discussion today on security and trade. Australia/US trade is fair and reciprocal and each of our nations has no closer ally’, Mr Turnbull wrote on Twitter.
Beyond this, Australia would not have to provide anything in return for the exemption. This is largely because the US has a large trade surplus with Australia already, making the antipodean nation less of a target for ‘fairer trade’ than say, China, or the EU, for instance.
The decision is also largely due to Australia and the US sharing deep military and intelligence links – with an extensive shared military history.
This is a major diplomatic victory for the Turnbull government and helped to ease insecurities that Australia could suffer the brunt of new protectionist measures from the US.
Nonetheless, there are some that posit that China suffering the brunt of the tariffs could still hurt Australia, with China being Australia’s number #1 export audience, particularly for iron ore, an essential compound in steel.
Anticipation Builds for Looming UK Spring Budget Statement – GBP Exchange Rates Climb
Sterling (GBP) traded broadly higher on Monday, kicking off the week on solid form as markets prepared for the possibility that tomorrow’s UK Spring Budget Statement could also include an upbeat growth forecast.
Many are expecting the UK’s Office of Budgeting Responsibility (OBR) forecast to be slightly more optimistic, with the UK’s economic performance having ramped up significantly since November last year.
This could take the form of a 1.5% forecast for growth this year and next, up from the previous outlook of 1.4%, and 1.3%.
Ian Stewart Chief Economist at Deloittee suggested as much, claiming that there is ‘a decent chance they nudge up both years to 1.5%’.
‘The good news is that the improving trend in public borrowing will enable the OBR to pencil in substantially lower numbers for public sector borrowing in the next two years. In terms of the government’s target of eliminating the current budget deficit, excluding investment, the Spring Statement seems likely to show that most of the hard work on deficit reduction has been achieved’.
Markets are not expecting any notable changes to the budget specifically, so these readings could take centre stage for the markets, with an upbeat outlook liable to distract from the current Brexit negotiation hold-up and potentially put AUD/GBP under increased pressure.
AUD/GBP Exchange Rate Forecast: RBA Speeches in the Spotlight
Looking ahead, the Australian Dollar Pound Sterling (AUD/GBP) exchange rate could see greater movement depending on speeches this week from RBA Assistant Governors Michele Bullock and Christopher Kent, with talks scheduled for Tuesday and Thursday.
Analysts will be looking to heavily scrutinise their comments in an attempt to try and ascertain whether the Reserve Bank of Australia (RBA) has shifted in its outlook, particularly with the bank’s Governor Philip Lowe having sounding relatively upbeat in his last speech.
Beyond this, markets will keep a lingering eye on China’s response to the US tariff measures, with any form of retaliatory measure liable to turn the heat up under the ‘Aussie’ Dollar.