Potential for AU Benefits from Commodity Prices Enables AUD/GBP Exchange Rate Advance
The Australian Dollar has firmed against the Pound today, making consistent gains against the Pound and other currency peers like the US Dollar and Euro.
While there hasn’t been much Australian economic data out recently, the Australian Dollar has still appreciated thanks to forecasts from Macquarie Bank.
The Bank has closely linked the value of the Australian Dollar to the price of commodities that Australia exports, saying;
‘The key difference between now and 2000/01 is that the prices of Australia’s resources exports are around 180% higher in USD terms and the terms of trade are up nearly 60%.
Modelling of the fundamental value of the Australian dollar shows that the terms of trade is by far the most important determinant’.
Macquarie analysts have warned that falling terms of trade could damage the AUD, but also predicted that major gains are possible if terms of trade rise significantly.
Downgrade of Q4 UK GDP Growth Triggers Pound to Australian Dollar Exchange Rate Slump
The news that the UK economy has grown at its slowest pace in five years has damaged the Pound and caused a -0.4% decline against the Australian Dollar.
The Office for National Statistics (ONS) downgraded its growth readings, for both year-on-year and quarter-on-quarter readings for Q4 2017.
Elaborating on the ONS’s findings, Statistician Darren Morgan said;
‘A number of very small revisions to mining, energy generation and services were enough to see a slight downward revision to quarterly growth overall.
Services continued to drive growth at the end of 2017, but with a number of consumer-facing industries slowing, as price rises led to household budgets being squeezed’.
Putting a cautious lid on the situation, Pantheon Macroeconomics Chief UK Economist Samuel Tombs forecast that;
‘The latest GDP data suggests that the [UK] economy remains in a fragile state and does not need to be cooled with another [interest] rate rise as soon as May’.
Australian Dollar to Pound Exchange Rate Forecast: Minor Risk of AUD/USD Decline on Manufacturing Stats
The coming week won’t bring much high-impact economic news from Australia; the main event will be the announcement of AIG’s manufacturing index on 1st March.
The manufacturing performance reading for February is tipped to show a minor reduction in activity, from 58.7 points to 57.16.
Although this will still indicate growing levels of manufacturing activity, it will constitute a slowdown so could temporarily devalue the Australian Dollar.
The ANZ-Roy Morgan consumer confidence reading will also be out next week, coming on 27th February.
The confidence measure fell from 119.5 points to 115.3 earlier this week, so a rise back to the 119-point region next week could bring AUD/GBP exchange rate gains.
Pound traders will have a busier week ahead, with GBP/AUD turbulence possible when confidence and PMI data comes out over 28th February to 2nd March.
Wednesday’s GfK consumer confidence reading is predicted to show falling optimism; Sterling could be weakened by such news.
If Thursday and Friday’s manufacturing and construction PMI readings show growth, however, the Pound may be able to regain lost ground against the Australian Dollar.