Australian Dollar Pound Exchange Rate Falls as Australian Employment Rally Fades
The Australian Dollar Pound exchange rate fell on Friday as the week’s Fed news continued to limit demand for risk-correlated currencies. Domestic factors supporting the ‘Aussie’ also faded, causing AUD GBP to fall below the week’s opening levels of 0.59.
If you're looking to make an international money transfer, we recommend TorFX.
Australian Dollar (AUD) Strength Fades as Fed’s Hawkish Outlook Takes Hold
Demand for the Australian Dollar has been generally solid for most of the week despite the excitement surrounding this week’s Federal Reserve meeting.
Various local factors have supported the ‘Aussie’, including strength in the price of iron ore (Australia’s most lucrative commodity) and on Thursday an impressive Australian employment report from November.
Analysts and the Reserve Bank of Australia (RBA) had recently been concerned about Australia’s labour market due to underwhelming job results published in October and September, but November’s results revealed that the participation rate had increased further than expected.
The number of new jobs created in November was also far higher than expected at 39.1k, while October’s number of new jobs was revised up to 15.2k.
While this bolstered demand for the ‘Aussie’ on Thursday, its strength faded on Friday as the Federal Reserve’s hawkish tone from the week’s meeting weakened the long-term outlook for risk trade.
Pound (GBP) Edges Higher Despite Bank of England (BoE) Disappointment
Friday saw the Pound beating out risk-correlated currencies like the Australian Dollar due to the risk-off movements of the foreign exchange market, despite Sterling having a relative lack of upside factors by the end of the week.
Thursday’s Bank of England (BoE) policy decision saw policymakers playing down the previously perceived impressiveness of this week’s UK inflation stats.
The bank indicated that, while it believed global inflation would improve significantly in 2017, it did not necessarily mean that UK monetary policy would be tightened as ultra-loose policy was still necessary to protect Britain’s economy from the downside risks of the Brexit process.
Thursday night also saw comments from EU leaders suggesting that a post-Brexit UK-EU trade deal could take as long as 10 years to negotiate. Despite this, the Pound performed decently on Friday.
Australian Dollar Pound Exchange Rate Forecast: Fed Bullishness may Let Up in Coming Week
While the Fed’s 2017 outlook for as many as three potential interest rate hikes is likely to be a long-term downside factor for Australian Dollar trade, in the short-term the ‘Aussie’ could recover from its poor performance this week.
As the US Dollar has rallied this week, the currency may be sold from its highs in the coming week. This would also lead to the Australian Dollar being bought up from its lows.
The Australian currency may also be boosted by Tuesday’s Reserve Bank of Australia (RBA) meeting minutes report as well as potential improvements in commodity trade throughout the week.
Sterling, on the other hand, could continue to see volatile trade depending on emerging Brexit news. Next Friday’s UK Consumer Price Index (CPI) results for Q3 could also inspire some holiday movement in the Pound if it misses projections in some way.
AUD GBP Interbank Rate
At the time of writing, the Australian Dollar Pound exchange rate trended in the region of 1.69, while the Pound Australian Dollar exchange rate traded at around 0.59.