Australian Dollar Pound Falls from Three-Month High as Trade Surplus Falls
The Australian Dollar to Pound (AUD GBP) exchange rate fell from a new three-month high on Thursday night following a sharp downturn in Australia’s Trade Balance.
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Figures released on Thursday show that the trade surplus fell to $1.30bn in January, a significant drop from the $3.33bn surplus reached in December.
After reaching an all-time high at the end of 2016, markets had forecast that it would climb even higher in the New Year.
The lacklustre reading was largely caused by a 3% drop in exports as demand for commodities such as iron ore was hit by a slowdown in industrial activity in China, with pollution concerns caused by a blanket of smog prompting factories to be temporarily shut down.
UBS bank also warned that the dramatic drop will likely effect economic growth at the start of the year, saying;
‘While normalisation is likely ahead, the data to date implies a large net export drag on Q1 real GDP, and risk to our forecast Q1 current account surplus.’
Meanwhile, Sterling’s overnight advance has not been without its own troubles as a report from the Institute for Fiscal Studies (IFS) suggests that UK families could soon be £5,000 a year worse off.
The paper on living standards suggests that the “long shadow” of the financial crisis will lead household incomes to see little to no growth over the next two years.
The report comes at a time when consumer spending is already expected to plummet as the sudden rise of inflation and slowing wage growth reduces disposable incomes for most families.
The Pound is also likely to struggle to advance on Friday following the release of the UK’s latest Services PMI as it is expected to have fallen from 54.5 to 54.1 last month.
However the Australian Dollar could find itself in a similar situation as the AiG domestic Services Index is also expected to have dropped in February.
Current Interbank Exchange Rates
At the time of writing the AUD GBP exchange rate was trending around 0.61 and the GBP AUD exchange rate was trending around 1.62