2017 Australian Dollar Pound Exchange Rate Edges Higher on Extended Risk-Rally
This week’s risk-rally has defied expectations and continued on Thursday. Wednesday’s Donald Trump press conference left USD traders highly disappointed, boosting the already high demand seen for risky currencies like the ‘Aussie’ this week. The 2017 Australian Dollar Pound exchange rate has gained over a penny since opening at 0.59 on Monday.
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Australian Dollar (AUD) Benefits from Iron Ore Prices and Trump Conference
The Australian Dollar has seen strong performance throughout the week so far.
The antipodean currency initially defied a plunge in prices of iron ore (Australia’s primary export) thanks to solid domestic data and generally high risk-sentiment in markets.
This upside movement in the ‘Aussie’ has been extended towards the end of the week as prices of iron ore rise again despite forecasters widely expecting a solid drop.
Chinese iron ore futures increased on Wednesday and Thursday, taking prices of the commodity to US$80 per tonne. However, spot prices have risen slower than Chinese futures.
Demand for the Australian Dollar has also been bolstered since Wednesday night’s press conference with US President-elect Donald Trump, at which Trump was too busy fielding questions about a Russian hacking scandal to talk about fiscal policy.
This left investors widely disappointed as they sold off the US Dollar and indulged in riskier AUD.
Pound (GBP) Remains Weak on Lasting Brexit Single Market Fears
Sterling has performed poorly this week as demand for the British currency continues to be undermined by concerns that the UK government lacks a concise Brexit negotiation plan or negotiation team.
Markets have also all but given up hope that the UK government will fight to retain access to the EU single market, despite pressure from Tory backbenchers and the opposition Labour party to preserve it.
This week’s UK data has been unable to offer Sterling much support either, as Wednesday’s UK trade balance update printed at a worse-than-projected -£4.17b.
The primary hope keeping Sterling afloat this week has been the expectation that the UK Supreme Court will uphold the High Court ruling that the Brexit process must be begun through Parliament rather than just the UK government. This has increased hopes that MPs will vote for single market access to be a part of negotiations.
2017 Australian Dollar Pound Forecast: Sterling Unlikely to Gain Unless Risk Appetite Fades
The Australian Dollar is likely to register some further gains against the Pound this week. The only thing that is likely to take the exchange rate lower in the next day would be a sudden risk-off rally that sees investors rushing to ‘safe haven’ currencies like the US Dollar.
Currently, USD investors are by far the most interested in the fiscal policies of President-elect Donald Trump and what they could mean for US inflation and Federal Reserve interest rates in the coming year.
As a result, any hawkish comments from the Fed may bolster ‘safe haven’ demand, but what investors really want to hear is some clarity from Trump himself about what he plans to do with fiscal policy when he takes office next week.
Trump had previously indicated he would begin to implement his financial stimulus measures the moment he is inaugurated on the 20th of January, but with only a week to go and no further clarity on the situation investors are growing anxious.
Unless this happens and prices of iron ore remain resilient and strong, the Australian Dollar is likely to hold most of this week’s gains against the Pound until next week at least.
Friday’s session has little to offer in the way of ecostats, meaning unless something happens to alter investor appetite for risk AUD GBP is unlikely to see any significant shifts.
AUD GBP Interbank Rate
At the time of writing, the 2016 Australian Dollar Pound exchange rate trended in the region of 0.61, while the Pound Australian Dollar exchange rate traded at around 1.63.